Your Credit Score: What it means

Before they decide on the terms of your loan (which they base on their risk), lenders must find out two things about you: your ability to repay the loan, and if you will pay it back. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only assess the info in your credit reports. They don't take into account income, savings, down payment amount, or factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding any other demographic factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will improve 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 history ensures that there is sufficient information in your report to calculate a score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply.

At Secure Mortgage Company, we answer questions about Credit reports every day. Give us a call at (713) 667-5472.