Your Credit Score: What it means

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

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only consider the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad of your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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 history ensures that there is sufficient information in your report to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.

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