A Score that Really Matters: The Credit Score

Before lenders decide to lend you money, they need to know that you're willing and able to pay back that mortgage. To understand whether you can repay, they look at your income and debt ratio. To calculate your willingness to repay the loan, they consult your credit score.

Fair Isaac and Company developed the original FICO score to help lenders assess creditworthines. You can learn more on FICO here.

Your credit score is a direct result of your history of repayment. They never take into account income, savings, down payment amount, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider only what was relevant to a borrower's willingness to pay back the lender.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

For the agencies to calculate 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 generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

At Executive Lending Group, we answer questions about Credit reports every day. Call us at 4056158543.