Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to discover two things about you: your ability to pay back the loan, and your willingness to repay the loan. To assess whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to pay back the loan, they consult your credit score.
Fair Isaac and Company built the original FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score comes from your history of repayment. They never consider income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering other irrelevant factors.
Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score is based on the good and the bad of your credit history. Late payments count against you, but a record of paying on time will improve it.
To get a credit score, borrowers 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 report to generate a score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.
At Integris Loans, we answer questions about Credit reports every day. Call us: 8014134570.