About Your Credit Score
Before lenders make the decision to lend you money, they have to know that you're willing and able to pay back that loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.
Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty 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 any other personal factors.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score considers positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise it.
Your report must contain 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 sufficient information in your report to generate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage.
Tenby J. Dahman The Dahman Team can answer your questions about credit reporting. Give us a call: 3038627760.