A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that mortgage. To understand your ability to repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed to assess willingness to pay without considering other demographic factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score comes from both the good and the bad in your credit history. Late payments count against you, but a record of paying on time will improve it.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is enough information in your report to build an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage.

U.S.A. Lending, Inc. can answer questions about credit reports and many others. Give us a call: 305-967-7200.