Credit Scoring

Before lenders decide to give you a loan, they want to know that you're willing and able to repay that mortgage loan. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only consider the information in your credit reports. They don't consider income, savings, down payment amount, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely what was relevant to a borrower's likelihood to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments will 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 six months of payment history. This payment history ensures that there is sufficient information in your report to assign an accurate score. Should you not meet the criteria for getting a credit score, you may need to work on your credit history before you apply for a mortgage loan.

North American Financial can answer your questions about credit reporting. Give us a call: 702-524-1376.