Your Credit Score: What it means

Before deciding on what terms they will offer you a mortgage loan, lenders want to know two things about you: your ability to pay back the loan, and if you are willing to pay it back. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To calculate your willingness to repay the loan, they look at 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 information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other personal factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score considers both positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will improve it.

To get a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your report to assign a score. If you don't meet the minimum criteria for getting a score, you may need to work on a credit history prior to applying for a mortgage loan.

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

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