Credit Scores

Before lenders decide to give you a loan, they want to know that you're willing and able to pay back that mortgage. To understand whether you can repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score comes from the good and the bad of your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

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

At Prime Capital Mortgage Corp, we answer questions about Credit reports every day. Give us a call: 248-644-1200.

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