Your Credit Score: What it means

Before they decide on the terms of your loan (which they base on their risk), lenders need to discover two things about you: whether you can pay back the loan, and if you will pay it back. To figure out your ability to repay, lenders assess 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 assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other irrelevant factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score is based on the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.

To get a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your report to calculate a score. Some folks 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.

SLI Mortgage, LLC can answer your questions about credit reporting. Call us at (512) 731-8607.

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