Your Credit Score: What it means
Before lenders make the decision to give you a loan, they want to know that you are willing and able to pay back that loan. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.
The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was developed as a way to consider solely what was relevant to a borrower's willingness to repay a loan.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from both the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.
To get a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up credit history before they apply for a loan.
Reliance Mortgage Service, Inc can answer questions about credit reports and many others. Call us: 562 320-0510.