About Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders need to know two things about you: your ability to pay back the loan, and your willingness to repay the loan. To figure out your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a result of 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 FICO scores were invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative information in your credit report. 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 a payment history of six months. This payment history ensures that there is sufficient information in your credit to calculate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.

Marshall Lending can answer your questions about credit reporting. Give us a call: 9162758775.