Your Credit Score: What it means

Before lenders decide to lend you money, they must know if you are willing and able to repay that mortgage loan. To assess whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

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

Credit scores only consider the info contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was developed as a way to consider only that which was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score is calculated from both the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

To get a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your report to assign a score. Should you not meet the minimum criteria for getting a credit score, you might need to establish a credit history before you apply for a mortgage loan.

Foxfield Financial can answer your questions about credit reporting. Call us: 720-598-8300.