About Your Credit Score

Before they decide on the terms of your 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 pay back the loan, they assess your debt-to-income ratio. To assess your willingness to pay back the loan, they look at your credit score.

The most widely used credit scores are called 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.

Your credit score is a result of your repayment history. They never consider your income, savings, down payment amount, or factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's likelihood to pay back a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to calculate an accurate score. Should you not meet the criteria for getting a credit score, you may need to establish a credit history before you apply for a mortgage.

At Coastal Mortgage Corp., we answer questions about Credit reports every day. Call us: 504-866-5626.

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