About Your Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders must discover two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To assess your ability to pay back the loan, they look at your income and debt ratio. To calculate your willingness to repay the loan, they look at 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). For details on FICO, read more here.

Credit scores only assess the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first 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 the lender.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

Your credit report must 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 sufficient information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

United Lending can answer questions about credit reports and many others. Give us a call: 512-592-5462.