Your Credit Score: What it means

Before lenders decide to lend you money, they must know if you are willing and able to pay back that loan. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.

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

Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is now. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to pay back a loan.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score reflects both the good and the bad of your credit history. 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 history ensures that there is sufficient information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage loan.

Channel Mortgage LLC can answer questions about credit reports and many others. Give us a call: 7186399500.

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Maspeth, NY 11378-1806