Your Credit Score: What it means

Before they decide on the terms of your loan (which they base on their risk), lenders need to know two things about you: your ability to repay the loan, and your willingness to pay back the loan. To figure out your ability to repay, lenders assess your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

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

Credit scores only assess the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess willingness to pay while specifically excluding any other demographic factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.

Trustin Mortgage, LLC can answer your questions about credit reporting. Call us at (302) 765-8089.

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