Your Credit Score: What it means

Before they decide on the terms of your mortgage loan, lenders must discover two things about you: whether you can pay back the loan, and how committed you are to repay the loan. To figure out your ability to repay, they assess your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the information contained in your credit profile. They do not consider your income, savings, down payment amount, or factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad of your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

Your credit report must 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 report to assign an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply.

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

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