Credit Scores

Before they decide on the terms of your loan (which they base on their risk), lenders need to find out two things about you: whether you can repay the loan, and if you will pay it back. To assess whether you can repay, they assess your income and debt ratio. To assess your willingness to repay the loan, they consult your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider only that which was relevant to a borrower's likelihood to pay back a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is calculated from the good and the bad in your credit history. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your report should contain 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 sufficient information in your report to build a score. Some borrowers 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.

At Price Mortgage Group LLC, we answer questions about Credit reports every day. Call us at 405-513-7700.