Credit Scores

Before lenders decide to give you a loan, they must know if you are willing and able to repay that mortgage. To understand whether you can pay back the loan, they look at your income and debt ratio. To calculate your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. We've written a lot more on FICO here.

Credit scores only take into account the info in your credit profile. They never take into account your income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay without considering other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score results from both positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to assign an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage loan.

At Metrolink Mortgage, we answer questions about Credit reports every day. Give us a call at 303-523-7119.