Credit Scoring

Before they decide on the terms of your loan, lenders need to find out two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To understand your ability to repay, they assess your income and debt ratio. In order to calculate your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. We've written a lot more on FICO here.

Credit scores only assess the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to pay without considering other irrelevant factors.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score is calculated from the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.

To get a credit score, you must have an active credit account with a payment history of six months. This 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 may need to build up credit history before they apply for a loan.

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