About Your Credit Score
Before they decide on the terms of your loan, lenders need to find out two things about you: your ability to pay back the loan, and if you are willing to pay it back. To understand your ability to repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.
The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.
Your credit score is a direct result of your repayment history. They do not take into account your income, savings, down payment amount, or demographic factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other irrelevant factors.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
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 enough information in your credit to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply for a loan.
Mutual Security Mortgage can answer questions about credit reports and many others. Give us a call: (303) 931-7879.