Your Credit Score: What it means
Before lenders make the decision to give you a loan, they want to know that you are willing and able to pay back that mortgage. To figure out your ability to repay, they look at your debt-to-income ratio. In order to assess your willingness to pay back the 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.
Credit scores only consider the information in your credit reports. They do not take into account income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to pay back a loan.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
Your credit report should have 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 report to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.
Mutual Security Mortgage can answer your questions about credit reporting. Give us a call: (303) 931-7879.