Credit Scores

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Before deciding on what terms they will offer you a loan, lenders want to find out two things about you: whether you can pay back the loan, and how committed you are to pay back the loan. To understand your ability to pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthiness. For details on FICO, read more here.

Credit scores only consider the information contained in your credit reports. They don't consider income, savings, down payment amount, or personal factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering other demographic factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score reflects the good and the bad of your credit history. Late payments count against you, but a record of paying on time will raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient 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 may need to build up credit history before they apply.

PFS Funding can answer your questions about credit reporting. Call us at (925) 560-7644.

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