Your Credit Score: What it means

Before lenders make the decision to give you a loan, they have to know if you're willing and able to repay that loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely 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). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan without considering any other personal factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score is calculated wtih both positive and negative information in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

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 payment history ensures that there is enough information in your report to assign an accurate score. Should you not meet the minimum criteria for getting a score, you may need to work on your credit history prior to applying for a mortgage.

At The Rate Kings Mortgage LLC, we answer questions about Credit reports every day. Call us: 6105723635.