A Score that Really Matters: The Credit Score

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Before lenders decide to lend you money, they want to know if you're willing and able to repay that mortgage. To understand your ability to pay back the loan, they assess your income and debt ratio. To calculate your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company developed the original FICO score to assess creditworthiness. We've written more about FICO here.

Credit scores only assess the info contained in your credit profile. They never consider income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding any other demographic factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score considers positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to assign a score. If you don't meet the criteria for getting a score, you might need to work on your credit history prior to applying for a mortgage.

Bluff City Mortgage, Inc can answer your questions about credit reporting. Give us a call: (901) 861-8022.