Your Credit Score: What it means

Before deciding on what terms they will offer you a mortgage loan, lenders want to find out two things about you: your ability to pay back the loan, and your willingness to repay the loan. To assess whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more about FICO here.

Credit scores only assess the info contained in your credit reports. They never consider your income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

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

Your report should have 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 payment history ensures that there is sufficient information in your report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.

At Channel Mortgage LLC, we answer questions about Credit reports every day. Give us a call at 7186399500.

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Connecting the Dots to Home Ownership

55-25 69th Street 1st Floor
Maspeth, NY 11378-1806