Your Credit Score: What it means

Before deciding on what terms they will offer you a loan, lenders must know two things about you: your ability to pay back the loan, and if you will pay it back. To understand your ability to 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 developed the first FICO score to assess creditworthines. We've written a lot more about FICO here.

Your credit score comes from your history of repayment. They never consider your income, savings, amount of down payment, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "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 that which was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score reflects both the good and the bad of your credit history. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

To get a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your credit to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply for a loan.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about credit reports and many others. Call us at 214-663-5355.