A Score that Really Matters: Your Credit Score
Before lenders decide to give you a loan, they want to know if you are willing and able to pay back that loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to pay back the loan, they look at your credit score.
Fair Isaac and Company built the original FICO score to assess creditworthines. You can find out more about FICO here.
Credit scores only assess the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to repay a loan.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score is calculated wtih both positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
Your report should 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 enough information in your report to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply.
At Churchill Mortgage Company, we answer questions about Credit reports every day. Call us: (703) 551-4107.