A Score that Really Matters: The Credit Score

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Before lenders make the decision to lend you money, they must know that you are willing and able to pay back that mortgage. To understand your ability to pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to repay the loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Your credit score comes from your repayment history. They don't consider your income, savings, amount of down payment, or demographic factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score comes from both the good and the bad in your credit report. Late payments count against you, but a record of paying on time will raise it.

To get a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is enough information in your report to build a score. Should you not meet the minimum criteria for getting a credit score, you might need to work on a credit history prior to applying for a mortgage loan.

Gateway Mortgage Denver can answer questions about credit reports and many others. Call us: 720-440-9741.