Credit Scoring

Before they decide on the terms of your mortgage loan, lenders need to discover two things about you: whether you can pay back the loan, and your willingness to repay the loan. To assess whether you can repay, they assess your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. You can find out more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income, savings, down payment amount, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other personal factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score is calculated from the good and the bad of your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

Your credit report must contain 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 history ensures that there is sufficient information in your report to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply for a loan.

Mutual Security Mortgage can answer questions about credit reports and many others. Give us a call at (303) 931-7879.

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