Your Credit Score: What it means

Before lenders make the decision to lend you money, they need to know if you're willing and able to pay back that mortgage. To assess your ability to 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 widely 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). For details on FICO, read more here.

Credit scores only consider the information 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 these scores were invented as it is today. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

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

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 sufficient information in your report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.

Carter Financial Solutions can answer your questions about credit reporting. Give us a call: 866-840-8745 x2.

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Carter Financial Solutions

1810 Pacific Ave
Stockton, CA 95204