Credit Scoring

Before lenders decide to give you a loan, they have to know that you are willing and able to pay back that loan. 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.

Fair Isaac and Company developed the original FICO score to assess creditworthines. We've written more on FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to consider only what was relevant to a borrower's likelihood to pay back a loan.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score results from positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve 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 a score. If you don't meet the criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage.

Foxfield Financial can answer questions about credit reports and many others. Call us: 720-598-8300.

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