Your Credit Score: What it means

Before they decide on the terms of your loan, lenders want to discover two things about you: whether you can repay the loan, and your willingness to pay back the loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.

Credit scores only consider the information in your credit reports. They do not take into account your income, savings, down payment amount, or 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 consider only that which was relevant to a borrower's willingness to repay a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit 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 history ensures that there is sufficient information in your report to calculate a score. Should you not meet the minimum criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage loan.

MortgageZ llc NMLS 2156016 can answer questions about credit reports and many others. Give us a call at 8557558700.