A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to know two things about you: whether you can repay the loan, and your willingness to repay the loan. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. In order to calculate your willingness to repay the loan, they look at your credit score.

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

Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to pay back the lender.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is based on the good and the bad of your credit history. Late payments count against your score, but a record of paying on time will raise it.

Your report must contain 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 history ensures that there is enough information in your report to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

At Executive Lending Group, LLC, we answer questions about Credit reports every day. Call us at 8165258000.