Credit Scores

Before lenders decide to give you a loan, they have to know if you're willing and able to repay that mortgage. To assess 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 formulated the first FICO score to assess creditworthines. We've written a lot more about FICO here.

Credit scores only consider the information contained in your credit reports. They never take into account income, savings, amount of down payment, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other personal factors.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score results from positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to generate a score. If you don't meet the criteria for getting a score, you may need to work on your credit history before you apply for a mortgage.

Blue Door Mortgage can answer your questions about credit reporting. Call us: (617) 527-BLUE(2583).

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