Your Credit Score: What it means

Before deciding on what terms they will offer you a loan, lenders must discover 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 pay back the loan, they look at your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your repayment history. They do not consider your income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. 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 likelihood to pay back a loan.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will improve 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 payment history ensures that there is sufficient information in your credit to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply.

PREMIERE MORTGAGE SERVICES, INC. can answer questions about credit reports and many others. Give us a call at 978-422-2311.

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