Your Credit Score: What it means

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to know two things about you: your ability to repay the loan, and if you are willing to pay it back. To understand whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company built the original FICO score to assess creditworthines. You can learn more about FICO here.

Your credit score comes from your repayment history. They never consider income, savings, amount of down payment, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is now. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's likelihood to repay 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 lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you may need to establish a credit history before you apply for a mortgage.

Savers Home Loans can answer your questions about credit reporting. Call us: (800) 974-0509.