Credit Scoring

Before lenders decide to lend you money, they have to know if you are willing and able to repay that loan. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To calculate your willingness to pay back the loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only assess the info in your credit profile. They do not take into account your income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account only what was relevant to a borrower's likelihood to repay the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad in your credit history. Late payments count against your score, but a record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

Greystone Loans, Inc. can answer your questions about credit reporting. Give us a call: 9094671090.