Your Credit Score: What it means

Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that loan. To assess your ability to repay, they assess 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 Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only take into account the info 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 today. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad of your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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 sufficient information in your report to calculate a score. Should you not meet the minimum criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.

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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