Credit Scoring

Before deciding on what terms they will offer you a loan, lenders want to know two things about you: whether you can repay the loan, and your willingness to repay the loan. To figure out your ability to repay, they assess your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Credit scores only take into account the information in your credit profile. They do not consider income, savings, amount of down payment, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay without considering other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will raise it.

Your report must 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 payment history ensures that there is sufficient information in your credit to calculate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

At First Community Bank of Central Al., we answer questions about Credit reports every day. Give us a call at (334) 285-8850.

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