Your Credit Score: What it means

Before lenders decide to give you a loan, they want to know if you're willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, they assess your income and debt ratio. To calculate your willingness to repay the mortgage loan, they look at your credit score.

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

Your credit score comes from your repayment history. They never take into account income, savings, amount of down payment, or factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's willingness to repay the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments count against your score, 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 at least six months of payment history. This payment history ensures that there is sufficient information in your report to build a score. If you don't meet the minimum criteria for getting a score, you may need to work on a credit history before you apply for a mortgage.

At F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org), we answer questions about Credit reports every day. Call us: 214-300-8756.



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