About Your Credit Score

Before lenders make the decision to give you a loan, they want to know if you're willing and able to pay back that mortgage. To understand whether you can repay, they assess your income and debt ratio. To calculate your willingness to pay back the loan, they consult your credit score.

The most commonly 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 about FICO here.

Credit scores only consider the information contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "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 consider only what was relevant to a borrower's likelihood to pay back the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is based on both the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient 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 build up a credit history before they apply.

The Rate Kings Mortgage LLC can answer your questions about credit reporting. Call us at (610) 572-3635.