Your Credit Score: What it means
Before lenders make the decision to give you a loan, they want to know that you are willing and able to pay back that mortgage. To figure out your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay the loan, they look at your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on FICO here.
Credit scores only take into account the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other demographic factors.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.
To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your report to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply.
Contemporary Mortgage Services, Inc can answer your questions about credit reporting. Give us a call at 407-834-3377.
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