Credit Scoring

Before deciding on what terms they will offer you a mortgage loan, lenders want to find out two things about you: your ability to repay the loan, and how committed you are to pay back the loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company built the first FICO score to assess creditworthines. You can learn more on FICO 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 dirty a word when these scores were invented as it is in the present day. Credit scoring was invented as a way to take into account only what was relevant to a borrower's willingness to repay a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad of your credit report. Late payments count against your score, but a record of paying on time will improve it.

Your credit 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 enough information in your credit to calculate a score. Some people don't have a long enough credit history to get a credit score. They should spend some time building credit history before they apply.

United Lending can answer questions about credit reports and many others. Give us a call: 512-592-5462.