Your Credit Score: What it means

Before lenders decide to lend you money, they must know that you are willing and able to repay that mortgage 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.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only assess the information contained in your credit profile. They do not take into account income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's likelihood to pay back the lender.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score considers positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.

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 credit to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.

At The Elite Lending Team at Milestone Mortgage Corporation, we answer questions about Credit reports every day. Call us at 561-373-4149.