Credit Scores

Before deciding on what terms they will offer you a loan, lenders need to find out two things about you: whether you can pay back the loan, and your willingness to repay the loan. To assess whether you can repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only take into account the info contained in your credit reports. They do not consider your income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to consider only that which was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad of your credit history. Late payments lower your credit score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply.

Marshall Lending can answer your questions about credit reporting. Call us: 9162758775.