Your Credit Score: What it means

Before they decide on the terms of your loan, lenders want to find out two things about you: whether you can repay the loan, and if you will pay it back. To assess your ability to repay, they look at your debt-to-income ratio. To calculate your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. We've written more about FICO here.

Credit scores only consider the information in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account only what was relevant to a borrower's likelihood to pay back the lender.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score comes from the good and the bad of your credit history. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your 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 history ensures that there is enough information in your credit to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply for a loan.

U.S.A. Lending, Inc. can answer questions about credit reports and many others. Call us: 305-967-7200.