A Score that Really Matters: Your Credit Score

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Before lenders decide to give you a loan, they have to know that you are willing and able to pay back that mortgage loan. To assess whether you can repay, they assess your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

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

Credit scores only take into account the information contained 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 bad a word when FICO scores were invented as it is now. Credit scoring was developed to assess willingness to repay the loan without considering other irrelevant factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score is based on the good and the bad in your credit history. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your report to generate 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.

The Dave Radke Team at Standard Bank and Trust can answer questions about credit reports and many others. Give us a call: 312-806-9309.