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 pay back that mortgage loan. To assess your ability to repay, they look at your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's likelihood to pay back a loan.

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

Your report must 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 credit to assign an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to establish your credit history prior to applying for a mortgage loan.

Affinity Mortgage Brokers can answer questions about credit reports and many others. Call us: 719-425-2226.