About Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders need to discover two things about you: your ability to pay back the loan, and if you are willing to pay it back. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. You can learn more on FICO here.

Credit scores only take into account the info in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding other irrelevant factors.

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

Your credit 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 enough information in your credit to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on your credit history prior to applying for a mortgage.

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