Credit Scores

Before lenders make the decision to lend you money, they want to know if you are willing and able to pay back that mortgage loan. To understand whether you can repay, they assess your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.

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

Credit scores only take into account the info contained in your credit profile. They don't take into account your income, savings, down payment amount, or factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih 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.

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. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

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

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