Credit Scores

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to discover two things about you: whether you can pay back the loan, and if you will pay it back. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company built the original FICO score to assess creditworthines. We've written a lot more on FICO here.

Credit scores only take into account the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was developed as a way to consider solely what was relevant to a borrower's likelihood to repay a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers positive and negative information in your credit report. 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 report to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend some time building credit history before they apply for a loan.

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

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