Your Credit Score: What it means

Before deciding on what terms they will offer you a mortgage loan, lenders need to find out two things about you: whether you can repay the loan, and if you are willing to pay it back. To figure out your ability to repay, lenders assess your debt-to-income ratio. In order to assess your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Credit scores only consider the info contained in your credit profile. They don't take into account your income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to consider only that which 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 considers both positive and negative information in your credit report. Late payments count against your score, 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 sufficient information in your report to build a score. Some people don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply.

Nationwide Home Loans can answer your questions about credit reporting. Call us: 5626935048.

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