Your Credit Score: What it means

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

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Your credit score is a direct result of your history of repayment. 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 in the present day. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to pay back the lender.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your 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 sufficient information in your report to assign an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to establish a credit history before you apply for a mortgage loan.

Secure Mortgage Company can answer questions about credit reports and many others. Give us a call: (713) 667-5472.