Your Credit Score: What it means

Before lenders make the decision to lend you money, they have to know if you are willing and able to repay that mortgage. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. We've written more on FICO here.

Your credit score is a result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 an accurate score. Should you not meet the criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage.

Channel Mortgage LLC can answer questions about credit reports and many others. Call us: (718) 639-9500.

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