About Your Credit Score

Before deciding on what terms they will offer you a loan, lenders want to discover two things about you: your ability to pay back the loan, and if you will pay it back. To figure out your ability to repay, they look at your debt-to-income ratio. To assess how willing you are 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. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from both positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

Your 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 payment history ensures that there is enough information in your credit to generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to work on your credit history before you apply for a mortgage loan.

Mario Vega can answer your questions about credit reporting. Call us: 877-310-6200.

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