A Score that Really Matters: The Credit Score

Before they decide on the terms of your loan, lenders must find out two things about you: whether you can repay the loan, and if you will pay it back. To understand your ability to repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

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

Your credit score comes from 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 take into account only that which was relevant to a borrower's willingness to repay the lender.

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

Your credit report should 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 report to generate a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

Price Mortgage Group LLC can answer questions about credit reports and many others. Give us a call: 405-513-7700.

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