Your Credit Score: What it means

Before lenders decide to give you a loan, they must know if you are willing and able to repay that mortgage loan. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.

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

Credit scores only assess the info contained in your credit reports. They never consider your income, savings, amount of down payment, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's likelihood to repay the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

To get a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your report to generate an accurate score. Should you not meet the criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage loan.

Ashok Lakshmanan can answer questions about credit reports and many others. Call us at 630-717-3600.

English Spanish