Credit Scoring

Before they decide on the terms of your loan, lenders need to find out two things about you: whether you can pay back the loan, and how committed you are to pay back the loan. To understand your ability to pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the loan, they look at your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. 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 don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

Your 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 credit to build a score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

Marshall Lending can answer questions about credit reports and many others. Call us: 9162758775.