Your Credit Score: What it means

Before lenders decide to lend you money, they want to know if you are willing and able to repay that loan. To understand your ability to repay, they assess your income and debt ratio. To assess your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company developed the original FICO score to assess creditworthines. You can find out more on FICO here.

Credit scores only take into account the info contained in your credit profile. They don't consider your income, savings, down payment amount, or personal factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to consider only what was relevant to a borrower's likelihood to repay the lender.

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

For the agencies to calculate a credit score, you 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 credit to build a score. If you don't meet the criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage.

At America's Money Source, we answer questions about Credit reports every day. Call us at (407) 898-7559.

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