A Score that Really Matters: The Credit Score

Before lenders make the decision to give you a loan, they have to know that you are willing and able to pay back 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 calculated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Credit scores only assess the information contained in your credit profile. 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 FICO scores were invented as it is today. Credit scoring was developed as a way to consider only 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 a few other factors are considered. Your score is calculated from both the good and the bad in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is enough information in your report to calculate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply.

Nationwide Home Loans can answer your questions about credit reporting. Give us a call at 5626935048.