A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they want to know that you are willing and able to repay that mortgage loan. To understand your ability to repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

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

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other personal factors.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score results from both positive and negative items in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit report should contain 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 enough information in your report to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

The Mortgage Exchange Service LLC can answer questions about credit reports and many others. Call us: 703.255-5810.

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