Your Credit Score: What it means

Before deciding on what terms they will offer you a mortgage loan, lenders need to know two things about you: your ability to repay the loan, and if you are willing to pay it back. To figure out your ability to repay, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. You can find out more about FICO here.

Your credit score is a result of your history of repayment. They do not consider income, savings, down payment amount, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score reflects the good and the bad in your credit history. Late payments count against your score, but a record of paying on time will improve it.

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

U.S.A. Lending, Inc. can answer questions about credit reports and many others. Give us a call: 305-967-7200.