About Your Credit Score
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 are willing to pay it back. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Credit scores only assess the information contained in your credit reports. They do not consider income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan without considering any other irrelevant factors.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on 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 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 history ensures that there is enough information in your report to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply for a loan.
At Omni Mortgage Corp., we answer questions about Credit reports every day. Call us: 718-441-7000.