Your Credit Score: What it means

Before lenders decide to lend you money, they must know that you are willing and able to repay that loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. We've written a lot more on FICO here.

Credit scores only assess the info in your credit reports. 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 FICO scores were invented as it is in the present day. Credit scoring was invented as a way to take into account only what was relevant to a borrower's willingness to repay the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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

AmeriBest Mortgage can answer questions about credit reports and many others. Call us at 3217777277.