Your Credit Score: What it means

Before lenders decide to lend you money, they want to know if you're willing and able to pay back that mortgage. To assess your ability to pay back the loan, they assess your debt-to-income ratio. In order to calculate your willingness to repay the loan, they look at your credit score.

The most commonly 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 about FICO here.

Credit scores only assess the information in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's likelihood to pay back the lender.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score considers positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will raise it.

To get 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 build a 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 up a credit history before they apply.

Reliance Mortgage Service, Inc can answer your questions about credit reporting. Call us at 5623200510.

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