A Score that Really Matters: The Credit Score

Before they decide on the terms of your mortgage loan, lenders want to discover two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. You can learn more about FICO here.

Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's likelihood to repay a loan.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score considers both positive and negative items in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your report should contain 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 assign a score. Some folks don't have a long enough credit history to get a credit score. They should build up a 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 at (334) 285-8850.

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