Your Credit Score: What it means

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Before lenders decide to lend you money, they must know if you're willing and able to pay back that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the original FICO score to assess creditworthiness. For details on FICO, read more here.

Credit scores only assess the information contained in your credit profile. They don't consider your income, savings, down payment amount, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "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 other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad in your credit history. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve 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 sufficient information in your credit to calculate an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage.

Pinnacle Capital Mortgage can answer your questions about credit reporting. Give us a call: 602-265-5626.