Credit Scoring

Before deciding on what terms they will offer you a mortgage loan, lenders must know two things about you: whether you can repay 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, they use your credit score.

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

Credit scores only assess the information contained in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score is based on the good and the bad of your credit history. 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 at least six months of payment history. This payment history ensures that there is sufficient information in your report to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage.

At Homewood Mortgage, Inc., we answer questions about Credit reports every day. Call us at 205-941-1484.

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