Credit Scores

Before lenders make the decision to give you a loan, they need to know if you are willing and able to repay that 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 widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information in your credit profile. They do not take into account income, savings, down payment amount, or demographic factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

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 report to generate a score. Should you not meet the criteria for getting a credit score, you might need to establish your credit history prior to applying for a mortgage.

Summit Financial, LLC can answer questions about credit reports and many others. Give us a call: 4142980180.