Your Credit Score: What it means

Before they decide on the terms of your mortgage loan, lenders want to know two things about you: whether you can repay the loan, and if you will pay it back. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To calculate your willingness to pay back the loan, they look at your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.

Credit scores only take into account the information in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was developed to assess willingness to pay without considering any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

Your report must 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 payment history ensures that there is enough information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

First Southeast Mortgage Corporation can answer your questions about credit reporting. Call us at 954.920.9799.

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