A Score that Really Matters: Your Credit Score

Before lenders decide to lend you money, they want to know that you are willing and able to repay that mortgage loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. We've written more on FICO here.

Your credit score comes from your repayment history. They don't take into account income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated from both the good and the bad in your credit report. Late payments lower your score, but consistently making future payments on time will raise 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 payment history ensures that there is sufficient information in your report to build an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

American Commerce Mortgage can answer your questions about credit reporting. Call us at 714-970-9700.