About Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must discover two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To understand whether you can repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly 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). We've written a lot more about FICO here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider only what was relevant to a borrower's willingness to repay the lender.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is calculated from the good and the bad in your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

To get a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your report to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.

Reliance Mortgage Service, Inc can answer your questions about credit reporting. Call us: 562 320-0510.

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