Before lenders decide to lend you money, they need to know if you're willing and able to pay back that loan. To assess your ability to pay back the loan, 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 built the original FICO score to assess creditworthines. You can learn more on FICO here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to pay back a loan.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score is calculated from both the good and the bad in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.
Your report must contain 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 enough information in your report to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to 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.