About Your Credit Score

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: your ability to pay back the loan, and if you will pay it back. To understand whether you can pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.

Credit scores only consider the information contained in your credit profile. They never take into account your income, savings, down payment amount, or factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score considers positive and negative items in your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your credit to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

Savers Home Loans can answer questions about credit reports and many others. Give us a call at (800) 974-0509.