Credit Scores

Before lenders make the decision to lend you money, they need to know that you're willing and able to repay that loan. To understand your ability to repay, 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 Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding any other irrelevant factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score comes from both the good and the bad of your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

To get a credit score, borrowers must have an active credit account with six months of payment history. 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 should build up credit history before they apply for a loan.

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