About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders need to discover two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to repay, they look at your debt-to-income 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. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out 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. Credit scoring was developed to assess willingness to pay while specifically excluding any other irrelevant 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 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 history ensures that there is sufficient information in your credit to calculate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.

First State Bank can answer questions about credit reports and many others. Give us a call at 4025970500.