Credit Scoring

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must discover two things about you: whether you can repay the loan, and if you are willing to pay it back. To figure out your ability to repay, they assess your debt-to-income ratio. In order to assess your willingness to repay the loan, they look at 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 (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 profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's likelihood to pay back the lender.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score comes from the good and the bad of your credit history. Late payments count against you, but a consistent record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to generate an accurate score. Should you not meet the minimum criteria for getting a score, you may need to work on your credit history prior to applying for a mortgage loan.

Boardwalk Mortgage can answer your questions about credit reporting. Give us a call: 1-800-606-2794.