Your Credit Score: What it means
Before lenders make the decision to lend you money, they have to know if you're willing and able to repay that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.
The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's willingness to repay the lender.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score reflects the good and the bad in your credit history. Late payments lower your credit score, but consistently making future payments on time will improve your score.
To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up a credit history before they apply.
At Executive Lending Group, we answer questions about Credit reports every day. Give us a call: 4056158543.