About Your Credit Score

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Before lenders decide to give you a loan, they have to know if you're willing and able to repay that mortgage. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding other demographic factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score is calculated wtih positive and negative items in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your report should have 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 credit to assign a score. Some folks don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply.

First National Bank can answer questions about credit reports and many others. Give us a call at (575)437-4880.