Your Credit Score: What it means

Before lenders decide to give you a loan, they must know that you're willing and able to repay that mortgage loan. To understand whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written more about FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding any other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated from both the good and the bad 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 raise your score.

To get a credit score, you must have an active credit account with a payment history of at least six months. This payment history ensures that there is enough information in your report to calculate an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage loan.

At The Rate Kings Mortgage LLC, we answer questions about Credit reports every day. Give us a call at (610) 572-3635.