A Score that Really Matters: The Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must know two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.

Credit scores only take into account the info contained in your credit reports. 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 today. Credit scoring was developed to assess willingness to pay while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments will lower your credit 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 credit to assign an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.

Pacific Loan Brokers can answer your questions about credit reporting. Give us a call: 877-310-6200.

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