Your Credit Score: What it means

Before lenders make the decision to give you a loan, they must know if you are willing and able to pay back that mortgage. To understand your ability to repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only consider the info in your credit profile. They don't consider income, savings, down payment amount, or demographic factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

Your 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 enough information in your credit to assign a score. If you don't meet the criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.

PREMIERE MORTGAGE SERVICES, INC. can answer questions about credit reports and many others. Call us: 978-422-2311.

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