About Your Credit Score
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Before lenders make the decision to give you a loan, they have to know that you are willing and able to repay that mortgage loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
The most commonly used credit scores are 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 consider the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other demographic factors.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from the good and the bad in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to build an accurate score. Should you not meet the minimum criteria for getting a score, you may need to work on a credit history before you apply for a mortgage.
At Colorado Home Mortgages, we answer questions about Credit reports every day. Give us a call: 303-471-4445.