Credit Scores

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Before they decide on the terms of your loan, lenders want to discover two things about you: your ability to pay back the loan, and your willingness to pay back the loan. To assess your ability to repay, they assess your income and debt ratio. To assess your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthiness. We've written a lot more about FICO here.

Credit scores only consider the information in your credit profile. They don't consider your income, savings, down payment amount, or personal factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score is calculated with both positive and negative items in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your report to build a score. Should you not meet the criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage loan.

Southern Trust Mortgage can answer questions about credit reports and many others. Call us at (301)-938-1655.