About Your Credit Score

Before lenders decide to give you a loan, they must know if you are willing and able to pay back that mortgage. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To calculate your willingness to repay the loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on FICO here.

Your credit score is a result of your history of repayment. They never consider income, savings, down payment amount, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to repay a loan.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score is calculated from the good and the bad of your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your 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 enough information in your report to build an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage.

America's Money Source can answer questions about credit reports and many others. Call us at 4078987559.