Credit Scoring

Before lenders make the decision to lend you money, they have to know if you are willing and able to repay that loan. To assess your ability to repay, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only consider 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 take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score is calculated wtih both positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is enough 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 build up credit history before they apply for a loan.

Taurus Mortgage Corporation can answer questions about credit reports and many others. Call us at 8776828787.