Your Credit Score: What it means

Before lenders make the decision to lend you money, they want to know if you're willing and able to pay back that mortgage. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use 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.

Your credit score is a result of your repayment history. They never consider income, savings, amount of down payment, or personal factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other demographic factors.

Your current debt load, 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 count against your score, but a consistent record of paying on time will raise it.

Your 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 payment history ensures that there is enough information in your report to build an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to work on a credit history prior to applying for a mortgage loan.

Foxfield Financial can answer your questions about credit reporting. Give us a call at 720-598-8300.