Your Credit Score: What it means

Before lenders make the decision to lend you money, they must know if you are willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult your credit score.

The most commonly used credit scores are 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 learn more about FICO here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score considers positive and negative items in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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 history ensures that there is enough information in your credit to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend some time building a credit history before they apply for a loan.

Blue Door Mortgage can answer questions about credit reports and many others. Call us: (617) 527-BLUE(2583).

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