Credit Scoring

Before lenders make the decision to lend you money, they need to know that you're willing and able to repay that mortgage loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess how willing you are to repay, they use 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 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They do not consider your income, savings, amount of down payment, or personal factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account solely that which was relevant to a borrower's likelihood to pay back a loan.

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

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

Pacificwide Lending can answer questions about credit reports and many others. Give us a call: 9254610500.