Credit Scores

Before they decide on the terms of your loan, lenders must find out two things about you: whether you can repay the loan, and how committed you are to repay the loan. To assess whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthines. You can learn more about FICO here.

Your credit score comes from your history of repayment. They do not consider income, savings, down payment amount, or personal factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is now. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to repay a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.

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 payment history ensures that there is sufficient information in your report to build an accurate score. If you don't meet the criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage loan.

At America's Money Source, we answer questions about Credit reports every day. Call us: 4078987559.