Credit Scoring

Before lenders make the decision to lend you money, they need to know that you are willing and able to pay back that mortgage loan. To assess whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness 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 (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 take into account your income, savings, down payment amount, or factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess a borrower's willingness to pay without considering other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

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 payment history ensures that there is sufficient information in your credit to generate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.

Custom Lending Group can answer your questions about credit reporting. Give us a call: 7072522700.