A Score that Really Matters: Your Credit Score

Before lenders decide to lend you money, they have to know if you are willing and able to repay that loan. To assess 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 calculated the first FICO score to assess creditworthines. We've written more about FICO here.

Credit scores only assess the info contained in your credit profile. They never consider income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is now. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from both 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.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your report to calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up 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.