About Your Credit Score
Before they decide on the terms of your loan (which they base on their risk), lenders must know two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to repay, they look at 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 Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.
Your credit score comes from 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 first invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other personal factors.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.
Your credit 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 credit to assign a score. If you don't meet the criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage loan.
PREMIERE MORTGAGE SERVICES, INC. can answer your questions about credit reporting. Call us at 978-422-2311.
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