A Score that Really Matters: The Credit Score

Before lenders decide to give you a loan, they need to know if you are willing and able to pay back that loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To calculate your willingness to repay the mortgage 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. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the info contained in your credit profile. They do not take into account income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account only what was relevant to a borrower's likelihood to repay a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to build a score. Some people 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.

Citywide Group can answer questions about credit reports and many others. Call us:  949-200-3800