Your Credit Score: What it means

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders need to find out two things about you: whether you can repay the loan, and if you will pay it back. To figure out your ability to repay, they look at your debt-to-income ratio. In order to assess your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. 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 invented as a way to consider solely what was relevant to a borrower's likelihood to repay the lender.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score comes from the good and the bad in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your report must 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 payment history ensures that there is enough information in your report to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.

Not Your Average Lender can answer questions about credit reports and many others. Call us at 9722039033.