Credit Scoring

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Before lenders make the decision to give you a loan, they need to know if you are willing and able to pay back that loan. To understand whether you can pay back the loan, 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 widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the information in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is now. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to pay back a loan.

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

Your report should have 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 credit to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

At FNB Town Square Mortgage, we answer questions about Credit reports every day. Call us at (817) 366-8666.