Your Credit Score: What it means

Before lenders decide to give you a loan, they must know if you're willing and able to pay back that mortgage. To figure out your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Your credit score is a direct result of your repayment history. They do not consider income, savings, down payment amount, or demographic factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to repay a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih positive and negative information in your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.

Your credit 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 enough information in your credit to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up a credit history before they apply for a loan.

At Omni Mortgage Corp., we answer questions about Credit reports every day. Call us: 718-441-7000.

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