Your Credit Score: What it means

Before they decide on the terms of your loan (which they base on their risk), lenders need to discover two things about you: whether you can repay the loan, and if you are willing to pay it back. To assess your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only consider the information in your credit reports. They do not consider your income, savings, amount of down payment, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay while specifically excluding any other irrelevant factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score results from positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.

Your credit report must 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 report to build a score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

1st Credential Mortgage Inc can answer your questions about credit reporting. Call us at (281) 778-0805.

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