Credit Scoring

Before lenders make the decision to give you a loan, they must know that you are willing and able to repay that loan. To assess your ability to repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Your credit score comes from your repayment history. They do not take into account your income, savings, amount of down payment, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score is calculated wtih positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply.

The Rate Kings Mortgage LLC can answer your questions about credit reporting. Call us: 6105723635.