About Your Credit Score

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Before lenders make the decision to lend you money, they must know that you are willing and able to repay that mortgage. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are 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 info in your credit profile. They do not consider income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making 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 generate a score. Should you not meet the minimum criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage.

Natalya Hill's Team a division of Hamilton Group Funding, Inc. can answer questions about credit reports and many others. Call us at 919-614-0388.

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