About Your Credit Score

Before lenders make the decision to give you a loan, they must know that you are willing and able to pay back that loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The 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 contained in your credit profile. They do not consider your income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad of 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, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

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