Credit Scores

Before lenders decide to give you a loan, they must know that you're willing and able to pay back that loan. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written more about FICO here.

Your credit score is a result of your repayment history. They do not take into account your income, savings, amount of down payment, or demographic factors like sex race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score is based on the good and the bad 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 at least six months of payment history. This payment history ensures that there is sufficient information in your report to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply for a loan.

Custom Lending Group can answer questions about credit reports and many others. Call us: 7072522700.