Credit Scoring

Before lenders decide to give you a loan, they have to know if you are willing and able to repay that mortgage. 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 calculated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed 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 number of inquiries are all calculated into credit scores. Your score is calculated from both the good and the bad in your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your report should 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 credit to assign an accurate score. Some folks 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 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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