Your Credit Score: What it means

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Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that mortgage loan. To figure out your ability to repay, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only take into account the information contained in your credit reports. 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 in the present day. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's willingness to pay back a loan.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score comes from both the good and the bad in your credit history. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your report must contain 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 history ensures that there is enough information in your credit to build a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply.

At American Pacific Mortgage, we answer questions about Credit reports every day. Call us at (209) 357-7000.

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