Credit Scoring

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Before they decide on the terms of your loan, lenders want to find out two things about you: whether you can repay the loan, and if you are willing to pay it back. To understand your ability to repay, they look at your income and debt ratio. To assess your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthiness. For details on FICO, read more here.

Credit scores only consider the information in your credit profile. They never consider your income, savings, down payment amount, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit history. Late payments count against you, but a record of paying on time will raise it.

Your report should contain 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 build a score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply for a loan.

At America's First Funding Group, we answer questions about Credit reports every day. Give us a call: 732-643-0200.