Your Credit Score: What it means

Before lenders decide to lend you money, they need to know if you're willing and able to pay back that mortgage. To assess your ability to repay, they assess your income and debt ratio. To assess your willingness to pay back the loan, they consult your credit score.

The most commonly used credit scores are called 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.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative items in your credit report. Late payments lower your credit 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 payment history ensures that there is sufficient information in your report to build a score. Should you not meet the criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage loan.

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