About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders need to find out two things about you: whether you can repay the loan, and if you are willing to pay it back. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.

Your credit score comes from your history of repayment. They never consider your income, savings, down payment amount, or demographic factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to repay a loan.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score reflects both the good and the bad of your credit history. Late payments lower your credit score, but consistently making future payments on time will raise your score.

To get 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 sufficient information in your report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply for a loan.

At Savers Home Loans, we answer questions about Credit reports every day. Give us a call at (800) 974-0509.