Credit Scores

Before they decide on the terms of your loan (which they base on their risk), lenders want to find out two things about you: whether you can pay back the loan, and if you will pay it back. To figure out your ability to repay, lenders look at your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company built the original FICO score to assess creditworthines. We've written more on FICO here.

Your credit score is a result of your history of repayment. They never consider income, savings, amount of down payment, or demographic factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

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 credit to build 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.

America's Money Source can answer your questions about credit reporting. Call us: 4078987559.