Your Credit Score: What it means

Before they decide on the terms of your loan, lenders must discover two things about you: whether you can repay the loan, and if you are willing to pay it back. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess how willing you are 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 don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score reflects both the good and the bad of 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.

Your report must contain 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 history ensures that there is sufficient information in your credit to calculate an accurate score. If you don't meet the criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage loan.

Affinity Mortgage Brokers can answer your questions about credit reporting. Call us: 719-425-2226.


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