Your Credit Score: What it means

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders must find out two things about you: your ability to repay the loan, and your willingness to repay the loan. To assess whether you can repay, they look at your income and debt ratio. In order to assess your willingness to pay back the loan, they look at 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 comes from your repayment history. They do not take into account your income, savings, amount of down payment, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. 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 improve it.

Your credit report should 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 sufficient information in your credit to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply.

At America's Money Source, we answer questions about Credit reports every day. Call us at 4078987559.