A Score that Really Matters: Your Credit Score

Before lenders decide to lend you money, they have to know if you are willing and able to repay that mortgage. To assess whether you can repay, they look at your income and debt ratio. To calculate your willingness to pay back 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.

Credit scores only assess the info in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's likelihood to pay back a loan.

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

To get a credit score, you 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 an accurate score. Should you not meet the criteria for getting a score, you may need to work on your credit history before you apply for a mortgage loan.

At Real Property Finance, we answer questions about Credit reports every day. Give us a call: 310-379-5997.

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