Your Credit Score: What it means

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

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

Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other personal factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information in your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

Your credit 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 enough information in your report to generate a score. If you don't meet the criteria for getting a score, you may need to work on a credit history before you apply for a mortgage.

At Southwest Funding #841
Company NMLS # 303440, we answer questions about Credit reports every day. Call us at 5122916100.