About Your Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders need to discover two things about you: your ability to repay the loan, and if you will pay it back. To understand whether you can repay, they look at your income and debt ratio. To calculate your willingness to repay the loan, they look at your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more about FICO here.

Credit scores only assess the information contained in your credit profile. They never 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 developed as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers positive and negative items in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

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

Blue Door Mortgage can answer your questions about credit reporting. Give us a call at (617) 527-BLUE(2583).

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