About Your Credit Score
Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must discover two things about you: your ability to repay the loan, and if you are willing to pay it back. To understand whether you can repay, they look at your income and debt 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). You can find out more about FICO here.
Your credit score comes from your repayment history. They never consider income, savings, amount of down payment, or factors like sex race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan without considering any other irrelevant factors.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score results from both positive and negative items in your credit report. Late payments count against you, but a record of paying on time will improve it.
To get a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your credit to generate a score. Should you not meet the criteria for getting a score, you might need to work on a credit history prior to applying for a mortgage loan.
At Custom Lending Group, we answer questions about Credit reports every day. Give us a call: (707) 252-2700.