About Your Credit Score

Before lenders decide to give you a loan, they need to know that you are willing and able to repay that loan. To assess whether you can repay, they look at your income and debt ratio. To calculate your willingness to repay the mortgage loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. 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 contained in your credit reports. They don't consider income, savings, down payment amount, or factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to repay a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score results from both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.

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 calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

At America's Home Loans, we answer questions about Credit reports every day. Call us: 701.222.0100.

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