Credit Scores

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Before lenders make the decision to lend you money, they need to know if you're willing and able to pay back that mortgage. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company built the first FICO score to assess creditworthiness. We've written more about FICO here.

Credit scores only consider the information contained in your credit reports. They never take into account income, savings, amount of down payment, or factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's willingness to repay a loan.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score is calculated with positive and negative items in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 enough information in your report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

VENTURE DEVELOPMENT INC can answer your questions about credit reporting. Call us at 952-929-2577.


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