Credit Scoring

Before lenders make the decision to give you a loan, they must know that you are willing and able to pay back that mortgage. To understand whether you can repay, they assess your income and debt 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 Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only consider the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan without considering other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score is calculated wtih positive and negative information in your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your credit to calculate a score. Should you not meet the criteria for getting a credit score, you might need to work on your credit history before you apply for a mortgage loan.

Coastal Lending Group LLC can answer your questions about credit reporting. Give us a call at 800-542-4937.

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