A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they want to know that you are willing and able to repay that loan. 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 original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your repayment history. They never consider income, savings, down payment amount, or factors like sex race, 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 without considering other irrelevant factors.

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

Your 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 credit to calculate an accurate score. Should you not meet the criteria for getting a credit score, you might need to work on a credit history prior to applying for a mortgage.

Pacificwide Lending can answer your questions about credit reporting. Call us at 9254610500.