A Score that Really Matters: Your Credit Score

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 your willingness to pay back the loan. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use 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 (high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only consider the info in your credit reports. They never consider your income, savings, down payment amount, or factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed to assess willingness to repay the loan 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 positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will raise it.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is enough 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 for a loan.

Trustin Mortgage, LLC can answer questions about credit reports and many others. Give us a call: (302) 765-8089.

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