A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must know two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company built 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 don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit report. Late payments will lower your credit 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 at least six months of payment history. This payment history ensures that there is enough information in your credit to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.

Foxfield Financial can answer your questions about credit reporting. Call us at 720-598-8300.