A Score that Really Matters: Your Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders must find out two things about you: whether you can pay back the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to assess your willingness to repay the loan, they look at your credit score.

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

Credit scores only consider the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score reflects the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your report to build an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend some time building credit history before they apply for a loan.

At Savers Home Loans, we answer questions about Credit reports every day. Call us: (800) 974-0509.