A Score that Really Matters: The Credit Score

Before lenders decide to give you a loan, they want to know if you are willing and able to repay that loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the info contained in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to repay a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit report must have 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 history ensures that there is enough information in your credit to calculate a score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

At Custom Lending Group, we answer questions about Credit reports every day. Call us at 7072522700.