Your Credit Score: What it means

Before lenders make the decision to give you a loan, they have to know if you are willing and able to pay back that mortgage. To figure out your ability to repay, they assess your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

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

Your credit score is a direct result of your history of repayment. They never take into account your income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other demographic factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish a credit history before you apply for a mortgage loan.

Foxfield Financial can answer questions about credit reports and many others. Give us a call at 7205988300.