Credit Scores

Before lenders make the decision to lend you money, they have to know that you're willing and able to repay that mortgage. To assess whether you can repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Your credit score comes from your history of repayment. They don't consider income, savings, down payment amount, or factors like sex 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 willingness to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score results from positive and negative information in your credit report. Late payments count against you, but a record of paying on time will improve it.

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 assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

Metro Mortgage can answer your questions about credit reporting. Call us at 4054054054.