Credit Scoring

Before lenders make the decision to lend you money, they need to know that you are willing and able to repay that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To calculate your willingness to repay the loan, they consult your credit score.

The most commonly 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). For details on FICO, read more here.

Credit scores only take into account the information in your credit profile. They do not take into account your income, savings, down payment amount, or personal factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay without considering any other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will improve it.

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

Harbor View Lending* a DBA of Megastar Financial can answer your questions about credit reporting. Give us a call at (207) 571-8034.