A Score that Really Matters: The Credit Score

Before lenders make the decision to give you a loan, they must know that you're willing and able to repay that mortgage. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad in 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 payment history ensures that there is sufficient information in your credit to assign a score. Some people 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 Nationwide Home Loans, we answer questions about Credit reports every day. Call us: (562) 693-5048.

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