Credit Scoring

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders need to find out two things about you: your ability to pay back the loan, and if you are willing to pay it back. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score comes from your repayment history. They don't consider income, savings, amount of down payment, or personal factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is today. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to pay back a loan.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score comes from both the good and the bad in your credit history. Late payments 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 six months of payment history. This history ensures that there is enough information in your report to generate a score. Some people don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply.

Wize Mortgage LLC can answer your questions about credit reporting. Call us at .