Your Credit Score: What it means

Before lenders decide to give you a loan, they need to know that you are 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 built the first FICO score to assess creditworthines. We have written more about FICO here.

Your credit score comes from your repayment history. They do not consider your income, savings, down payment amount, or personal factors such as sex, ethnicity, national origin, or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was developed as a way to take into account only what was relevant to a borrower's likelihood to repay a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will improve it.

To get a credit score, you must have an active credit account with a payment history of six months. This payment history ensures that there is enough information in your report to calculate a score. Some folks do not have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply.

At American First Bancorp, Inc., we answer questions about Credit reports every day. Call us at 330-492-7757.