Your Credit Score: What it means
Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to know two things about you: your ability to pay back the loan, and if you will pay it back. To assess your ability to repay, they assess your income and debt ratio. To assess your willingness 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. The 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 in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only what was relevant to a borrower's likelihood to pay back a loan.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your credit to calculate an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage.
Reliance Mortgage Service, Inc can answer questions about credit reports and many others. Call us: 5623200510.