Your Credit Score: What it means

Before lenders make the decision to lend you money, they want to know if you're willing and able to repay that loan. To assess whether you can repay, they assess your income and debt ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They never consider income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other demographic factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score comes from both the good and the bad in your credit history. Late payments lower your credit 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 payment history ensures that there is sufficient information in your report to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply for a loan.

At Executive Lending Group, LLC, we answer questions about Credit reports every day. Give us a call: 8165258000.

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