A Score that Really Matters: Your Credit Score

Before lenders make the decision to give you a loan, they need to know that you are willing and able to repay that mortgage. To figure out your ability to repay, lenders look at your debt-to-income ratio. To calculate your willingness to repay the mortgage loan, they look at your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.

Your credit score comes from your repayment history. They never take into account income, savings, down payment amount, or personal factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to pay without considering any other personal factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

Your report must 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 credit to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend some time building credit history before they apply.

Custom Lending Group can answer questions about credit reports and many others. Call us: (707) 252-2700.