Your Credit Score: What it means

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Before lenders make the decision to lend you money, they have to know that you're willing and able to pay back that mortgage. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness 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). We've written more about FICO here.

Your credit score comes from your history of repayment. They don't consider income, savings, amount of down payment, or demographic factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed to assess willingness to pay while specifically excluding any other demographic factors.

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

Your 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 payment history ensures that there is sufficient information in your credit to build an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply for a loan.

Bridge View Funding can answer questions about credit reports and many others. Call us at 415.931.2883.