Credit Scores

Before lenders make the decision to lend you money, they want to know if you are willing and able to repay that loan. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. In order to assess your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company developed the first FICO score to assess creditworthines. We've written a lot more about FICO here.

Credit scores only consider the info in your credit reports. They don't take into account your income, savings, amount of down payment, or demographic factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was developed to assess willingness to repay the loan without considering other demographic factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score results from both positive and negative items in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise 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 report to assign 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 a credit history before they apply for a loan.

North American Financial can answer questions about credit reports and many others. Give us a call at 702-524-1376.