A Score that Really Matters: Your Credit Score

Before lenders make the decision to lend you money, they want to know that you're willing and able to repay that loan. To understand whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only take into account the information contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were first invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.

For the agencies to calculate a credit score, you 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 generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to establish your credit history prior to applying for a mortgage.

Metro Mortgage can answer your questions about credit reporting. Give us a call at 866-300-1550.