Your Credit Score: What it means

Before lenders make the decision to give you a loan, they want to know if you're willing and able to pay back that mortgage. To figure out your ability to pay back the loan, lenders look at your debt-to-income 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 Fair Isaac & Company, a financial analytics agency, developed. 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 never consider your income, savings, down payment amount, or factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score is calculated from the good and the bad of 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.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your credit to calculate an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

At Reliance Mortgage Service, Inc, we answer questions about Credit reports every day. Give us a call at 562 320-0510.

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