Your Credit Score: What it means

Before lenders make the decision to lend you money, they need to know that you are willing and able to repay that loan. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more about FICO here.

Credit scores only take into account the information in your credit reports. They do not consider your income, savings, down payment amount, or personal factors like sex race, national origin or marital status. 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.

Your current debt load, 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 your score, but a consistent record of paying on time will improve it.

Your credit 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 sufficient information in your report to calculate a score. If you don't meet the criteria for getting a credit score, you might need to work on a credit history prior to applying for a mortgage.

At Not Your Average Lender, we answer questions about Credit reports every day. Give us a call: 9722039033.