A Score that Really Matters: The Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must find out two things about you: your ability to pay back 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 built the first FICO score to assess creditworthines. You can learn more on FICO here.

Your credit score is a direct result of your history of repayment. They never take into account 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 repay the loan while specifically excluding any other irrelevant factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score considers positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will improve it.

To get a credit score, borrowers must have an active credit account with six months of payment history. This payment 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.

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