About Your Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders must know two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To assess your ability to repay, lenders assess your debt-to-income ratio. In order to assess your willingness to repay the loan, they consult your credit score.

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

Credit scores only consider the information in your credit reports. They do not consider your income, savings, amount of down payment, or factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay without considering other demographic factors.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score is calculated wtih 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.

Your report must 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 payment history ensures that there is enough information in your report to build an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.

Coastal Mortgage Corp. can answer questions about credit reports and many others. Give us a call: 504-866-5626.

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