A Score that Really Matters: The Credit Score

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders need to find out two things about you: your ability to pay back the loan, and your willingness to repay the loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written more on FICO here.

Credit scores only assess the info contained in your credit profile. They never consider your income, savings, amount of down payment, or demographic factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score considers both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will raise it.

Your credit report must 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 credit to build a score. If you don't meet the criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage.

Omni Mortgage Corp. can answer questions about credit reports and many others. Call us at 7184417000.

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Omni Mortgage Corp.

118-18 101st Avenue
Richmond Hill, NY 11419