A Score that Really Matters: Your Credit Score

Before lenders make the decision to lend you money, they have to know if you are willing and able to pay back that mortgage loan. To assess whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay the mortgage 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 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information contained in your credit profile. They don't consider your income, savings, amount of down payment, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will improve it.

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 enough information in your report to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

At American Commerce Mortgage, we answer questions about Credit reports every day. Call us: 714-970-9700.

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