Credit Scores

Before they decide on the terms of your mortgage loan, lenders need to discover two things about you: your ability to repay the loan, and your willingness to pay back the loan. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness to repay the loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. You can learn more on FICO here.

Your credit score comes from your history of repayment. They do not take into account your income, savings, down payment amount, or demographic factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other personal factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad of your credit history. Late payments count against you, but a record of paying on time will improve it.

Your credit 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 credit to assign an accurate score. If you don't meet the criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage.

At Channel Mortgage LLC, we answer questions about Credit reports every day. Call us: (718) 639-9500.

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