A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. To assess your ability to pay back the loan, they look at your income and debt ratio. To calculate your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company built the original FICO score to assess creditworthines. For details on FICO, read more here.

Your credit score is a direct result of your repayment history. They never consider your income, savings, down payment amount, or personal factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding any other personal factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score is based on the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

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 sufficient information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a score, you may need to establish a credit history before you apply for a mortgage.

Omni Mortgage Corp. can answer questions about credit reports and many others. Call us: 718-441-7000.

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