Your Credit Score: What it means

Before lenders decide to give you a loan, they need to know if you're willing and able to pay back that loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written a lot more about FICO here.

Credit scores only take into account the info in your credit reports. They do not consider your income, savings, amount of down payment, or personal factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay while specifically excluding any other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score results from positive and negative items 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.

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 report to assign a score. If you don't meet the criteria for getting a credit score, you might need to work on a credit history prior to applying for a mortgage loan.

Custom Lending Group can answer your questions about credit reporting. Call us: (707) 252-2700.