A Score that Really Matters: The Credit Score

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Before lenders decide to give you a loan, they want to know if you are willing and able to repay that loan. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company built the first FICO score to assess creditworthiness. You can learn more on FICO here.

Your credit score is a direct 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 bad a word when these scores were invented as it is today. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

To get 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 report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

MHQ Financial Services can answer your questions about credit reporting. Call us at 573-302-9990.