Your Credit Score: What it means

Before lenders make the decision to give you a loan, they must know that you're willing and able to pay back 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 widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the info contained in your credit reports. They never take into account income, savings, down payment amount, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were first invented as it is in the present day. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to assign an accurate score. If you don't meet the criteria for getting a score, you might need to work on your credit history before you apply for a mortgage loan.

The Rate Kings Mortgage LLC can answer your questions about credit reporting. Call us at 8009468194.