Special offer

YOU CREDIT SCORE

By
Mortgage and Lending with PREMIER NATIONWIDE LENDING, LAKE CHARLES LA.

Before lenders make the decision to give you a loan, they want to know if you are willing and able to pay back that mortgage. To assess your ability to pay back the loan, they assess your INCOME AND DEBT RATIO. In order to assess 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. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on Fico here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other irrelevant factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score is based on both the good and the bad of your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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

Premier Nationwide Lending can answer your questions about credit reporting. Give us a call:337-794-0891

Comments (1)

Mike Cooper, Broker VA,WV
Cornerstone Business Group Inc - Winchester, VA
Your Neighborhood Real Estate Sales Pro

David, thanks for the explanation.  I'm sure the model used by FICO is designed to make things simple and quantitative, but when words like "willingness" are used to interpret a person's credit history it seems a little unfair considering what we've seen in the current economy.  I know a lot of people who are more than willing to pay their debts, but when a two income family becomes completely unemployed the "want to" and the "able to" don't always meet up anymore.  In that respect, it's unfair to them to pigeon hole them in a group of people who couldn't care less if they paid their bills. 

Jun 16, 2011 01:48 AM