Your Credit Score: What it means

Before they decide on the terms of your mortgage loan, lenders must find out two things about you: whether you can pay back the loan, and if you are willing to pay it back. To figure out 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). For details on FICO, read more here.

Credit scores only consider the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other demographic factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score considers positive and negative items in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

Your report must 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 history ensures that there is enough information in your credit to generate an accurate score. Should you not meet the criteria for getting a score, you might need to establish a credit history before you apply for a mortgage loan.

U.S.A. Lending, Inc. can answer your questions about credit reporting. Give us a call: 305-967-7200.