Credit Scoring

Before lenders decide to give you a loan, they must know if you are willing and able to repay that loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only take into account the info in your credit reports. They don't take into account income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to consider only that which was relevant to a borrower's willingness to repay a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score comes from both the good and the bad in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise 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 report to build an accurate score. If you don't meet the criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.

Coastal Mortgage Corp. can answer your questions about credit reporting. Call us at 504-866-5626.

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