A Score that Really Matters: The Credit Score

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

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

Credit scores only assess the information in your credit reports. They do not take into account your income, savings, amount of down payment, or demographic factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was envisioned as a way to take into account only what was relevant to a borrower's likelihood to repay the lender.

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

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your credit to assign a score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

At U.S.A. Lending, Inc., we answer questions about Credit reports every day. Call us: 305-967-7200.