A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they have to know that you're willing and able to repay that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay the loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more about FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to consider only what 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 is calculated from the good and the bad of your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise 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 payment history ensures that there is enough information in your report to calculate an accurate score. Should you not meet the criteria for getting a score, you may need to work on a credit history before you apply for a mortgage loan.

At Rick Brown, Elite Financing Group, we answer questions about Credit reports every day. Call us: 5122791520.

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Rick Brown, Elite Financing Group

RMLO NMLS #279018 Company NMLS #212369

RMLO NMLS #279018 Company NMLS #212369 3415 Greystone Drive Suite 205
Austin, TX 78731