Credit Scoring

Before lenders decide to lend you money, they want to know if you're willing and able to repay that mortgage loan. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult 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 (high risk) to 850 (low risk). You can learn more about FICO here.

Your credit score comes from your history of repayment. They do not take into account income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to take into account only what was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated from the good and the bad of your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to assign 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.

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

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