Your Credit Score: What it means

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Before deciding on what terms they will offer you a loan, lenders need to discover two things about you: whether you can repay the loan, and if you are willing to pay it back. To assess whether you can repay, they assess your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthiness. We've written a lot more about 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. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to pay back a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on 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.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your credit to assign a score. If you don't meet the criteria for getting a credit score, you may need to establish your credit history prior to applying for a mortgage.

EZ Funding Group, Inc. can answer your questions about credit reporting. Give us a call at 954-318-1110.