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 find out two things about you: your ability to pay back the loan, and if you will pay it back. To figure out your ability to repay, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. You can find out more on FICO here.

Your credit score is a result of your repayment history. They do not consider income, savings, down payment amount, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated from both the good and the bad of your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

For the agencies to calculate 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 sufficient information in your credit to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply.

Financial Edge Mortgage Corp. can answer your questions about credit reporting. Call us: 425-508-9988.

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