Credit Scores

Before lenders decide to give you a loan, they must know if you're willing and able to repay that mortgage loan. To understand your ability to pay back the loan, they assess your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Credit scores only assess the information in your credit profile. They don't consider your income, savings, amount of down payment, or factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to take into account only what was relevant to a borrower's likelihood to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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

Homewood Mortgage, Inc. can answer questions about credit reports and many others. Give us a call at 205-941-1484.

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