Credit Scores

Before deciding on what terms they will offer you a mortgage loan, lenders want to find out two things about you: whether you can repay the loan, and if you will pay it back. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more about FICO here.

Credit scores only assess the info contained in your credit profile. They don't consider income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to repay the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

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 report to assign a score. If you don't meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage loan.

Peerless Residential Mortgage can answer questions about credit reports and many others. Give us a call at (513) 713-1515.

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