A Score that Really Matters: Your Credit Score

Before lenders make the decision to give you a loan, they have to know if you're willing and able to repay that mortgage loan. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more about FICO here.

Credit scores only assess the info in your credit reports. They never consider income, savings, amount of down payment, or personal factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your report must 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 calculate a score. If you don't meet the criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage loan.

Savers Home Loans can answer questions about credit reports and many others. Call us: (800) 974-0509.