Your Credit Score: What it means

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders must know two things about you: your ability to pay back the loan, and your willingness to repay the loan. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your history of repayment. They do not consider your income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is today. Credit scoring was developed to assess willingness to pay while specifically excluding any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers positive and negative items in your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

Your credit 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 generate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply.

T.J. Cullen LO NMLS#: 145102 can answer your questions about credit reporting. Give us a call at 8433007558.