Credit Scores

Before lenders make the decision to lend you money, they have to know if you're willing and able to repay that mortgage. To understand whether you can repay, they look at your income and debt 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. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more about FICO here.

Credit scores only take into account the info in your credit profile. They don't take into account income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to repay the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score reflects both the good and the bad in your credit report. Late payments count against your score, but a record of paying on time will improve it.

Your report should have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This history ensures that there is enough information in your credit to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building credit history before they apply for a loan.

First Community Bank of Central Al. can answer questions about credit reports and many others. Give us a call: (334) 285-8850.

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