A Score that Really Matters: Your Credit Score
Before lenders make the decision to lend you money, they have to know that you are willing and able to pay back that mortgage. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay the loan, they consult your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.
Credit scores only take into account the information in your credit reports. They don't consider income or personal characteristics. 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 willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated from the good and the bad of your credit history. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your credit report should have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is sufficient information in your credit to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.
First Southeast Mortgage Corporation can answer questions about credit reports and many others. Call us at 954.920.9799.