Credit Scores

Before lenders make the decision to lend you money, they need to know that you're willing and able to repay that loan. To figure out your ability to repay, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. For details on FICO, read more here.

Credit scores only take into account the information in your credit reports. They don't consider your income, savings, down payment amount, or personal factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other demographic factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score is calculated 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.

Your report must have 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 payment history ensures that there is sufficient information in your credit to generate an accurate score. Should you not meet the criteria for getting a credit score, you may need to establish your credit history prior to applying for a mortgage.

Ashok Lakshmanan can answer your questions about credit reporting. Call us at 630-717-3600.


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