About Your Credit Score

Before lenders decide to give you a loan, they need to know that you are willing and able to repay that loan. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness 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. The FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only consider the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to assign a score. Should you not meet the minimum criteria for getting a credit score, you may need to work on a credit history prior to applying for a mortgage.

At Nationwide Home Loans, we answer questions about Credit reports every day. Give us a call: 5626935048.