Your Credit Score: What it means
Before lenders make the decision to give you a loan, they have to know if you're willing and able to repay that loan. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the original FICO score to assess creditworthines. You can learn more on FICO here.
Credit scores only assess 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 FICO scores were invented as it is today. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other irrelevant factors.
Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score is based on both the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.
Your credit report should 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 generate a score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply for a loan.
Bright Vision Mortgage can answer questions about credit reports and many others. Call us at (904) 342-3622.