About Your Credit Score

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Before they decide on the terms of your mortgage loan, lenders want to find out 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 repay, lenders look at your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

The most widely used credit scores are called 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 a lot more on FICO here.

Your credit score comes from your repayment history. They never take into account your income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's likelihood to pay back the lender.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score considers both positive and negative items in your credit report. Late payments count against you, but a record of paying on time will improve it.

For the agencies to calculate 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 credit to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building credit history before they apply.

VITEK MORTGAGE GROUP can answer questions about credit reports and many others. Give us a call: 530-885-1545.