Credit Scoring

Before lenders decide to lend you money, they need to know that you're willing and able to repay that loan. To understand your ability to pay back the loan, 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. 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 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 bad a word when these scores were invented as it is in the present day. Credit scoring was developed to assess willingness to repay the loan without considering any other personal factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

Your 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 enough information in your report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply for a loan.

Alternative Mortgage Group can answer questions about credit reports and many others. Call us: 561-395-4264.