Your Credit Score: What it means

Before lenders make the decision to give you a loan, they need to know that you are willing and able to pay back that mortgage. To understand your ability to pay back the loan, they assess your income and debt ratio. To calculate your willingness to repay the loan, they look at your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information contained in your credit profile. 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 now. Credit scoring was developed as a way to consider only what was relevant to a borrower’s willingness to repay the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated with 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.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your credit to generate an accurate score. Should you not meet the criteria for getting a score, you may need to establish a credit history before you apply for a mortgage loan.

Basic Pre-Approval

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  • Tell us about your credit history