About Your Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders want to discover two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company built the first FICO score to assess creditworthines. You can find out more on FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. 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 in the present day. Credit scoring was developed as a way to consider solely that which was relevant to a borrower's likelihood to repay a loan.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score results from positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your credit report should 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 sufficient information in your report to generate a score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.

AmeriBest Mortgage can answer your questions about credit reporting. Call us at 3217777277.