A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they have to know if you're willing and able to pay back that mortgage loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the info in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's likelihood to pay back a loan.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score is calculated from both the good and the bad in your credit history. 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 six months of payment history. This history ensures that there is enough information in your report to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

Executive Lending Group, LLC can answer questions about credit reports and many others. Give us a call: 8165258000.