Credit Scores

Before they decide on the terms of your loan, lenders need to know two things about you: your ability to repay the loan, and if you will pay it back. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only take into account the information contained in your credit profile. 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 assess a borrower's willingness to pay without considering any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your credit to generate an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage loan.

Pacificwide Lending can answer questions about credit reports and many others. Call us at 9254610500.