Your Credit Score: What it means

Before lenders make the decision to lend you money, they must know if you're willing and able to repay that mortgage. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use 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 about FICO here.

Your credit score is a direct result of your repayment history. They never consider income, savings, amount of down payment, or personal factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering other personal factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score reflects the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

Your report must 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 build an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend some time building up a credit history before they apply.

At PREMIERE MORTGAGE SERVICES INC., we answer questions about Credit reports every day. Give us a call: 978-422-2311.

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