A Score that Really Matters: Your Credit Score

Before lenders decide to give you a loan, they have to know if you are willing and able to repay that loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use 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). For details on FICO, read more here.

Your credit score comes from your history of repayment. They do not consider income, savings, amount of down payment, or demographic factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other irrelevant factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will raise it.

Your credit report must 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 credit to generate a 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.

Price Mortgage Group LLC can answer your questions about credit reporting. Give us a call: 405-513-7700.

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