Credit Scoring

Before they decide on the terms of your mortgage loan, lenders need to know two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other personal factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score considers positive and negative items in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

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 build a score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply.

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

Basic Pre-Approval

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