Credit Scoring

Before lenders make the decision to give you a loan, they need 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. In order to assess your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. You can find out more on FICO here.

Your credit score comes from your history of repayment. They do not consider income, savings, down payment amount, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was developed to assess willingness to repay the loan without considering other irrelevant factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score reflects the good and the bad in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your report should 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 history ensures that there is enough information in your report to assign an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on your credit history prior to applying for a mortgage loan.

North American Financial can answer your questions about credit reporting. Call us at 702-524-1376.