A Score that Really Matters: Your Credit Score

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Before lenders decide to lend you money, they need to know that you're willing and able to repay that mortgage loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is in the present day. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score reflects both the good and the bad in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

Your report should have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is enough information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply for a loan.

VSI Home Lending can answer questions about credit reports and many others. Give us a call: 260-338-2561.