A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they have to know if you're willing and able to repay that loan. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to assess creditworthines. You can learn more about FICO here.

Your credit score comes from your history of repayment. They do not consider your income, savings, amount of down payment, or factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was developed to assess willingness to pay while specifically excluding any other irrelevant factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score results from positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.

Hometown Financial Services can answer questions about credit reports and many others. Call us: (772) 252-6724.