A Score that Really Matters: Your Credit Score

Before lenders make the decision to give you a loan, they have to know if you are willing and able to pay back that mortgage loan. To understand whether you can pay back the loan, they assess your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

The most widely used credit scores are called 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 on FICO here.

Your credit score is a direct result of your history of repayment. They do not take into account income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will raise 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 history ensures that there is enough information in your credit to calculate a score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.

Foxfield Financial can answer your questions about credit reporting. Call us at 720-598-8300.