Your Credit Score: What it means

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

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

Credit scores only assess the info 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 first invented as it is now. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's willingness to pay back the lender.

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

Your 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 sufficient information in your report to calculate a score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

The Lending Source can answer your questions about credit reporting. Give us a call at (973) 601-2122.

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