Credit Scores

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Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to find out two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more about FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay without considering other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers positive and negative items in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.

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

Front Range Mortgage LLC can answer questions about credit reports and many others. Call us: (303) 524-9907.