About Your Credit Score


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Before they decide on the terms of your mortgage loan, lenders need to find out two things about you: whether you can repay 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 pay back the mortgage loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information in your credit reports. They don't take into account your income, savings, amount of down payment, or factors like gender, ethnicity, 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 invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score considers positive and negative items in your credit report. Late payments will 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 a payment history of six months. This history ensures that there is enough information in your credit to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building credit history before they apply for a loan.

GPN Mortgage can answer your questions about credit reporting. Call us at 405-720-7064.

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