Credit Scoring

Before deciding on what terms they will offer you a loan, lenders need to discover two things about you: your ability to repay the loan, and if you are willing to pay it back. To assess whether you can pay back the loan, 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. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only take into account the information in your credit reports. They do not consider income, savings, down payment amount, or demographic factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad of your credit history. Late payments count against you, but a consistent record of paying on time will improve it.

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 sufficient 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 some time building credit history before they apply.

Custom Lending Group can answer your questions about credit reporting. Call us: (707) 252-2700.