A Score that Really Matters: Your Credit Score

Before they decide on the terms of your mortgage loan, lenders must discover two things about you: your ability to repay the loan, and if you are willing to pay it back. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To calculate your willingness to pay back the loan, they consult your credit score.

The most commonly 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). 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. Credit scoring was developed to assess a borrower's willingness to pay without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad of your credit history. Late payments count against you, but a record of paying on time will raise it.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend some time building up a credit history before they apply.

At Harbor View Lending* a DBA of Megastar Financial, we answer questions about Credit reports every day. Call us at (207) 571-8034.