Credit Scores

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Before lenders make the decision to lend you money, they must know that you are willing and able to pay back that loan. To understand your ability to pay back the loan, they assess your income and debt 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. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the information in your credit profile. They do not consider income, savings, amount of down payment, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other demographic factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score reflects both the good and the bad in your credit report. Late payments count against your score, but a record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your credit to generate 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.

At Innovative Home Loans, LLC, we answer questions about Credit reports every day. Call us: (859) 240-1231.