Credit Scoring

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must know two things about you: your ability to repay the loan, and how committed you are to repay the loan. To understand whether you can repay, they assess your income and debt ratio. To assess your willingness to repay the loan, they consult your credit score.

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

Credit scores only consider the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

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

Executive Lending Group, LLC can answer questions about credit reports and many others. Call us at 8165258000.