Credit Scoring

Before lenders decide to lend you money, they want to know if you're willing and able to repay that mortgage loan. To assess whether you can repay, they assess your income and debt ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. You can find out more on FICO here.

Credit scores only assess the information in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other personal factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score reflects both the good and the bad of your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your credit 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 enough information in your report to calculate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

At Metro Mortgage, we answer questions about Credit reports every day. Give us a call at 866-300-1550.