Your Credit Score: What it means

Before lenders make the decision to give you a loan, they have to know that you are willing and able to pay back that loan. To figure out 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 loan, they consult 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 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was invented as a way to consider only that which was relevant to a borrower's likelihood to repay a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative items in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is enough information in your credit to assign an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.

United Capital Mortgage, Inc. can answer your questions about credit reporting. Give us a call at 214-718-7183.