A Score that Really Matters: Your Credit Score

Before lenders decide to lend you money, they must know if you're willing and able to repay that mortgage. To assess your ability to repay, they assess your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.

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

Your credit score comes from your repayment history. They do not take into account your income, savings, down payment amount, or demographic factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to repay a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad of your credit history. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply.

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

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