Credit Scores

Before lenders make the decision to lend you money, they have to know that you're willing and able to pay back that loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to assess your willingness to pay back the loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad of your credit history. Late payments count against you, but a record of paying on time will improve it.

Your report must have 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 history ensures that there is sufficient information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to establish a credit history before you apply for a mortgage loan.

Hill Valley Financial Services Inc. can answer your questions about credit reporting. Call us at 503-657-3311.