Your Credit Score: What it means

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

The most widely used credit scores are called 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 find out more on FICO here.

Credit scores only take into account the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other irrelevant factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score considers both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will raise it.

Your credit report should contain 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 payment history ensures that there is enough information in your credit to assign a score. Should you not meet the criteria for getting a credit score, you might need to work on 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: 562 320-0510.

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