Your Credit Score: What it means

Before they decide on the terms of your loan, lenders want to discover two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the original FICO score to assess creditworthines. You can learn more about FICO here.

Credit scores only take into account the information in your credit profile. They don't consider your income, savings, down payment amount, or demographic factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other irrelevant factors.

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

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your report to assign a score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

At Ashok Lakshmanan, we answer questions about Credit reports every day. Call us at 630-717-3600.


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