Credit Scores

Before they decide on the terms of your loan, lenders want to discover two things about you: your ability to pay back the loan, and your willingness to repay the loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only take into account the information in your credit reports. They don't take into account income, savings, amount of down payment, or personal factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score is calculated wtih positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise 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 report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.

Boardwalk Mortgage can answer questions about credit reports and many others. Give us a call: 1-800-606-2794.