Your Credit Score: What it means

Before lenders decide to give you a loan, they have to know if you're willing and able to repay that mortgage. To assess whether you can pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the loan, they look at your credit score.

The most commonly 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). For details on FICO, read more here.

Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.

Deliquencies, 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 from the good and the bad of your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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. Should you not meet the minimum criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage loan.

At Metro Mortgage, we answer questions about Credit reports every day. Give us a call: 866-300-1550.