Your Credit Score: What it means

Before lenders make the decision to give you a loan, they need to know that you're willing and able to pay back that loan. To assess whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only take into account the information contained in your credit profile. They don't consider your income, savings, down payment amount, or demographic factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

To get 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 an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage loan.

Capacity Lending, LLC can answer questions about credit reports and many others. Give us a call: 469-640-0400.

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