Credit Scores

Before lenders decide to lend you money, they have to know if you're willing and able to repay 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). We've written a lot more on FICO here.

Credit scores only take into account the info in your credit reports. They never take into account income, savings, down payment amount, or factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was developed to assess willingness to pay while specifically excluding any other demographic factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score comes from both the good and the bad in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

To get a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your report to assign an accurate score. Should you not meet the minimum criteria for getting a score, you might need to work on a credit history prior to applying for a mortgage.

At U.S.A. Lending, Inc., we answer questions about Credit reports every day. Call us at 305-967-7200.