Credit Scoring

Before lenders decide to give you a loan, they want to know that you are willing and able to pay back that loan. To assess your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only consider the information in your credit profile. They never consider your income, savings, amount of down payment, or personal factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was developed to assess willingness to pay while specifically excluding any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your credit report must have 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 report to calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply for a loan.

America's Money Source can answer questions about credit reports and many others. Call us at (407) 898-7559.

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