Your Credit Score: What it means
Before they decide on the terms of your loan, lenders want to discover two things about you: whether you can repay the loan, and if you are willing to pay it back. To understand your ability to repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the original FICO score to assess creditworthines. You can find out more on FICO here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other personal factors.
Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from positive and negative items 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.
To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough 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 build up a credit history before they apply for a loan.
AccessOne Mortgage can answer your questions about credit reporting. Call us at 919-787-6080.