A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to discover two things about you: your ability to pay back the loan, and if you will pay it back. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company developed the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Credit scores only consider the info in your credit profile. They do not take into account income, savings, down payment amount, or factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay without considering any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score reflects the good and the bad of 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.

Your credit report must 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 enough information in your credit to build 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.

Ruidoso Mortgage can answer your questions about credit reporting. Give us a call at 5752581316.