Credit Scoring

Before they decide on the terms of your loan (which they base on their risk), lenders need to find out two things about you: your ability to repay the loan, and if you are willing to pay it back. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other personal factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad in your credit history. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your credit report must have 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 history ensures that there is enough information in your credit to build a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

At 1st Credential Mortgage Inc, we answer questions about Credit reports every day. Give us a call: 2817780805.