A Score that Really Matters: Your Credit Score

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Before deciding on what terms they will offer you a loan, lenders want to find out two things about you: whether you can repay the loan, and your willingness to repay the loan. To assess whether you can pay back the loan, they look at 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. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated with positive and negative information in your credit report. Late payments count against your score, but a consistent 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 sufficient information in your credit to assign a score. Some people don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply.

Keypoint Mortgage can answer your questions about credit reporting. Call us: 201-998-9050.

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