Credit Scoring

Before lenders decide to give you a loan, they have to know that you're willing and able to repay that mortgage loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To calculate your willingness to pay back the loan, they consult your credit score.

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

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

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

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your credit to assign a score. Some folks 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. Give us a call at 7072522700.