Your Credit Score: What it means

Before deciding on what terms they will offer you a loan, lenders need to know two things about you: whether you can pay back the loan, and how committed you are to pay back the loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company built the first FICO score to assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is today. Credit scoring was developed to assess willingness to repay the loan without considering any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit history. Late payments count against your score, but a record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is enough information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply for a loan.

At PREMIERE MORTGAGE SERVICES, INC., we answer questions about Credit reports every day. Call us: 978-422-2311.

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