About Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must discover two things about you: your ability to pay back the loan, and how committed you are to pay back the loan. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay the loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.

Credit scores only consider the info contained in your credit profile. They do not take into account income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to pay without considering any other demographic factors.

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 improve your score.

Your credit 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 report to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply.

Real Property Finance can answer questions about credit reports and many others. Call us: 310-379-5997.

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