WHAT IS CREDIT?

Lenders look at two specific things when considering whether to offer you a loan or not...they want to know your ability to pay back the loan and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. The second, your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score is between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Credit scoring was developed as a way to consider only what was relevant to somebody's willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information 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.

A Credit Report is a report containing detailed information about your credit history, including identifying information, credit accounts, loans, bankruptcies, late payments, and recent inquiries. Credit reports can be obtained by prospective lenders with your permission, to determine your credit worthiness

Your credit report must contain 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 ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.