Your Credit Score: What it means

Before lenders decide to lend you money, they want to know that you're willing and able to pay back that mortgage. To assess your ability to pay back the loan, they look at your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score comes from your history of repayment. They never consider income, savings, amount of down payment, or demographic factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other irrelevant factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score results from positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is enough information in your report to calculate a score. Should you not meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage.

American Mortgage Advisers, Inc can answer your questions about credit reporting. Call us: 214-865-7442.

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