Your Credit Score: What it means

Before lenders make the decision to give you a loan, they want to know if you are willing and able to repay that mortgage loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.

Credit scores only consider the info contained in your credit profile. They do not take into account income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to repay the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad in your credit history. Late payments will lower your score, but consistently making future payments on time will improve your score.

To get 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 build a score. Should you not meet the criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

Nationwide Home Loans can answer your questions about credit reporting. Call us at (562) 693-5048.

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