Credit Scoring

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Before lenders decide to give you a loan, they have to know that you're willing and able to repay that loan. To assess your ability to repay, they look at 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 creditworthiness. You can learn more about FICO here.

Your credit score comes from your repayment history. They never consider income, savings, amount of down payment, or demographic factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering other personal factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score reflects the good and the bad of your credit report. Late payments count against you, but a record of paying on time will improve it.

Your credit report should 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 generate an accurate score. If you don't meet the minimum criteria for getting a score, you may need to work on your credit history prior to applying for a mortgage loan.

Paul M. Johnson - Mortgage Banker can answer your questions about credit reporting. Call us: 512-326-2186.