About Your Credit Score
Before they decide on the terms of your loan, lenders want to know two things about you: whether you can repay the loan, and your willingness to pay back the loan. To assess your ability to pay back the loan, lenders 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 help lenders assess creditworthines. We've written more about FICO here.
Your credit score comes from your history of repayment. They don't take into account income, savings, down payment amount, or factors like gender, ethnicity, 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 pay without considering other demographic factors.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score is calculated from both the good and the bad of your credit history. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.
At PREMIERE MORTGAGE SERVICES, INC., we answer questions about Credit reports every day. Call us: 978-422-2311.