Your Credit Score: What it means

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to know two things about you: your ability to pay back the loan, and if you will pay it back. To assess whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering 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 your score, but a consistent record of paying on time will improve it.

Your credit report must have 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 credit to calculate an accurate score. Should you not meet the minimum criteria for getting a score, you may need to establish a credit history before you apply for a mortgage loan.

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