Credit Scores

Before deciding on what terms they will offer you a loan, lenders must discover two things about you: your ability to repay the loan, and if you are willing to pay it back. To assess your ability to pay back the loan, they 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 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 consider the info contained in your credit profile. They do not consider your income, savings, down payment amount, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's willingness to repay the lender.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score reflects the good and the bad of your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your report must 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 enough information in your credit to assign an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.

Custom Lending Group can answer questions about credit reports and many others. Give us a call at (707) 252-2700.