A Score that Really Matters: The Credit Score

Before lenders make the decision to give you a loan, they want to know if you're willing and able to pay back that mortgage. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To calculate your willingness to repay the loan, they consult your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

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

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score is calculated wtih positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

Your credit report must have 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 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 for a loan.

Prime Capital Mortgage Corp can answer questions about credit reports and many others. Give us a call: 248-644-1200.

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