Credit Scores

Before they decide on the terms of your loan, lenders want to find out two things about you: your ability to pay back the loan, and if you are willing to pay it back. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering other personal factors.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score comes from the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

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 history ensures that there is sufficient information in your credit to assign a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

1st Credential Mortgage Inc can answer your questions about credit reporting. Call us: (281) 778-0805.