Your Credit Score: What it means

Before they decide on the terms of your loan, lenders need to know two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To understand whether you can pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only consider the info in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's likelihood to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad of your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

To get a credit score, you must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your report to assign a score. Some borrowers 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.

Wize Mortgage LLC can answer questions about credit reports and many others. Give us a call at .