About Your Credit Score

Before they decide on the terms of your mortgage loan, lenders want to find out two things about you: whether you can repay the loan, and if you will pay it back. To assess whether you can pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthines. We've written a lot more on FICO here.

Credit scores only consider the info in your credit profile. They do not take into account income, savings, amount of down payment, or demographic factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other personal factors.

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

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 credit to build an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply.

Hill Valley Financial Services Inc. can answer your questions about credit reporting. Give us a call at 503-657-3311.