Credit Scoring

Before lenders make the decision to lend you money, they must know if you are willing and able to pay back that loan. To understand whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They don't consider your income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score results from 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, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up 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.