Your Credit Score: What it means

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

The most widely used credit scores are called 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 find out more about FICO here.

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is today. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to pay back the lender.

Deliquencies, 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 is based on the good and the bad of your credit history. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

Bright Vision Mortgage can answer your questions about credit reporting. Give us a call: 9043423622.