Your Credit Score: What it means

Before lenders make the decision to lend you money, they have to know that you're willing and able to repay that mortgage. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more about FICO here.

Credit scores only take into account the information in your credit profile. They do not take into account income, savings, down payment amount, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to pay back a loan.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score reflects both the good and the bad of your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your credit report must 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 credit to generate a score. Should you not meet the criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage.

At Milestone Mortgage, Inc. NMLS#136714, we answer questions about Credit reports every day. Call us: 3175959600.