About Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to find out two things about you: whether you can pay back the loan, and if you will pay it back. To assess whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. We've written 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. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from the good and the bad of your credit history. Late payments count against you, but a record of paying on time will raise it.

Your credit report must have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is enough information in your report to calculate a score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage.

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