Your Credit Score: What it means

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Before lenders decide to lend you money, they want to know that you're willing and able to repay that loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.

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

Your credit score comes from your repayment history. They don't take into account income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding other demographic factors.

Past delinquencies, derogatory 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 of your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

Your 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 payment history ensures that there is sufficient information in your report to build a score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.

At Colorado Home Mortgages, Inc., we answer questions about Credit reports every day. Give us a call: 303-471-4445.