Credit Scoring

Before lenders make the decision to lend you money, they need to know that you are willing and able to repay that mortgage loan. 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. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only assess the information in your credit reports. They never consider your income, savings, down payment amount, or demographic factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding any other demographic factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

To get a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your report to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply.

Metro Mortgage can answer questions about credit reports and many others. Call us: 866-300-1550.

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