Credit Scoring

Before they decide on the terms of your loan, lenders must know two things about you: your ability to repay the loan, and how committed you are to pay back the loan. 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 FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information in your credit profile. They don't take into account your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan while specifically excluding any other demographic factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score is calculated wtih positive and negative items in your credit report. Late payments count against you, but a record of paying on time will improve it.

To get 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 credit to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply for a loan.

Savers Home Loans can answer your questions about credit reporting. Give us a call at (800) 974-0509.