Credit Scoring

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

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only consider the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding other personal factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score is calculated from both the good and the bad in your credit history. Late payments will lower your score, but consistently making future payments on time will raise your score.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to calculate a score. Some folks don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.

American Commerce Mortgage can answer questions about credit reports and many others. Call us: 714-970-9700.

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