Credit Scoring

Before deciding on what terms they will offer you a loan, lenders need to discover two things about you: your ability to repay the loan, and if you will pay it back. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company built the first FICO score to assess creditworthines. You can learn more about FICO here.

Credit scores only assess the info contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was developed to assess willingness to pay without considering any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers 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 improve 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 history ensures that there is sufficient information in your report to build a score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply for a loan.

Metro Mortgage can answer your questions about credit reporting. Call us: 866-300-1550.