Your Credit Score: What it means

Before lenders make the decision to give you a loan, they must know that you're willing and able to repay that loan. To assess your ability to pay back the loan, they 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). We've written a lot more about FICO here.

Your credit score is a 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 take into account only that which was relevant to a borrower's willingness to repay the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit history. Late payments count against you, but a record of paying on time will raise it.

Your credit report should 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 history ensures that there is enough information in your report to build a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.

At Bright Vision Mortgage, we answer questions about Credit reports every day. Call us at 9043423622.