Credit Scoring

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Before lenders make the decision to give you a loan, they have to know if you are willing and able to pay back that mortgage. To understand whether you can repay, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your repayment history. They do not consider income, savings, down payment amount, or demographic factors like sex race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to consider only that which was relevant to a borrower's willingness to repay the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score results from positive and negative items in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your 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 enough information in your report to calculate an accurate score. Should you not meet the criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.

Manhattan Lending, LLC can answer your questions about credit reporting. Give us a call: 512.257.3749.