Your Credit Score: What it means

Before lenders decide to lend you money, they need to know that you're willing and able to repay that mortgage. To assess your ability to repay, they look at 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 were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more about FICO here.

Credit scores only consider the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your credit to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

American Mortgage Advisers, Inc can answer your questions about credit reporting. Call us: 2148657442.