Your willingness to pay for future debt is best indicated by how you've paid other creditors in the past. The best source of your payment history is your credit report, which contains a list of your past and current obligations as well as 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.
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. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Different portions of your credit history are given different weights.
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35% of your FICO score is based on your specific payment history.
30% is your current level of indebtedness, marking the ratio between outstanding balance and available credit.
15% is based on your length of credit history (ten year old accounts are good, six month old ones aren't as good)
10% considers the types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards).
10% is pursuit of new credit and number of new inquiries |
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.
For more information about credit scores, download our complimentary brochure.
There are several ways to help you improve your score. For a more comprehensive credit consultation, email us or call us today at 866.7.DUNHAM (866.738.6426).
