Your Credit Score: What it means

Before they decide on the terms of your loan (which they base on their risk), lenders must discover two things about you: your ability to pay back the loan, and if you will pay it back. To figure out your ability to repay, they look at 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 Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was developed to assess willingness to pay while specifically excluding any other irrelevant 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 scores. Your score comes from the good and the bad in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your 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 history ensures that there is enough information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

At Wize Mortgage LLC, we answer questions about Credit reports every day. Call us: .