Credit Scoring

Before deciding on what terms they will offer you a mortgage loan, lenders must discover two things about you: whether you can pay back the loan, and how committed you are to repay the loan. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your repayment history. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding any other demographic factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score is calculated from both the good and the bad of your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

Your report should contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is sufficient information in your report to assign a score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

Nationwide Home Loans can answer questions about credit reports and many others. Call us at 5626935048.