Your Credit Score: What it means

Before lenders decide to lend you money, they want to know that you are willing and able to pay back that loan. To assess your ability to repay, lenders assess your debt-to-income ratio. In order to assess your willingness to repay the loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your repayment history. They never consider income, savings, down payment amount, or demographic factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score comes from 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.

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 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 should build up a credit history before they apply for a loan.

Hill Valley Financial Services Inc. can answer your questions about credit reporting. Call us at 503-657-3311.