Your Credit Score: What it means

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to find out two things about you: your ability to repay the loan, and if you will pay it back. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written a lot more on FICO here.

Credit scores only consider the information contained in your credit reports. They do not take into account your income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score considers positive and negative items 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.

To get 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 build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up a credit history before they apply for a loan.

At Foxfield Financial, we answer questions about Credit reports every day. Call us: 720-598-8300.