Credit Scores

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to know two things about you: whether you can repay the loan, and if you will pay it back. To assess your ability to repay, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only consider the information contained in your credit profile. They do not take into account your income, savings, amount of down payment, or demographic factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider only what was relevant to a borrower's willingness to pay back a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.

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 credit to build an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage.

Alternative Mortgage Group can answer your questions about credit reporting. Call us at 561-395-4264.