A Score that Really Matters: The Credit Score

Before lenders make the decision to give you a loan, they must know that you're willing and able to repay that mortgage. To assess your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They never take into account your income, savings, amount of down payment, or factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account only what was relevant to a borrower's willingness to repay a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad of your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your report should have 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 history ensures that there is sufficient information in your credit to build a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply.

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

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Nationwide Home Loans

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16211 Whittier Blvd.
Whittier, CA 90603