Credit Scoring

Before lenders decide to give you a loan, they want to know that you are willing and able to repay that mortgage loan. To figure out your ability to repay, lenders look at your debt-to-income 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 Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only consider the information in your credit reports. They don't consider income, savings, down payment amount, or factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to consider only that which was relevant to a borrower's willingness to pay back the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score is calculated wtih positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

Your credit report should 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 report to build a score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

Executive Lending Group, LLC can answer your questions about credit reporting. Give us a call: 8165258000.