Your Credit Score: What it means

Before they decide on the terms of your loan, lenders want to discover two things about you: whether you can repay the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company developed the original FICO score to assess creditworthines. You can find out more on FICO here.

Your credit score is a result of your history of repayment. They don't take into account income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first 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 repay a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score results from positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

Your 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 build a score. Should you not meet the criteria for getting a score, you may need to work on a credit history before you apply for a mortgage loan.

AmeriBest Mortgage can answer your questions about credit reporting. Give us a call at 3217777277.