Credit Scoring

Before lenders make the decision to give you a loan, they must know if you are willing and able to pay back that mortgage loan. To assess whether you can repay, they assess your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

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

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was invented as a way to consider only that which was relevant to a borrower's willingness to pay back a loan.

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

Your credit report should 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 calculate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply.

At Reliance Mortgage Service, Inc, we answer questions about Credit reports every day. Call us: 562 320-0510.

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