Credit Scores

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to know two things about you: your ability to pay back the loan, and if you will pay it back. To assess your ability to repay, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

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

Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess a borrower's willingness to pay without considering other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.

Your credit report must 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 payment history ensures that there is enough information in your report to build an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish a credit history before you apply for a mortgage loan.

Wize Mortgage LLC can answer your questions about credit reporting. Give us a call at .