A Score that Really Matters: Your Credit Score

Before they decide on the terms of your loan, lenders want to find out two things about you: your ability to repay the loan, and if you are willing to pay it back. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to calculate your willingness to repay the mortgage loan, they consult your credit score.

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

Your credit score comes from your history of repayment. 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 pay while specifically excluding any other personal factors.

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 scores. Your score considers both positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

Your credit report must contain 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 sufficient information in your credit to build a score. Should you not meet the criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.

First Community Bank of Central Al. can answer your questions about credit reporting. Give us a call: (334) 285-8850.

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