About Your Credit Score

Before lenders make the decision to give you a loan, they need to know if you're willing and able to pay back that loan. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can find out more on FICO here.

Your credit score comes from your history of repayment. They do not consider income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay without considering other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative information in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

To get a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your report to calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply for a loan.

At Ashok Lakshmanan, we answer questions about Credit reports every day. Call us: 6307173600.