About Your Credit Score
Before lenders decide to give you a loan, they have to know if you're willing and able to repay that mortgage loan. To assess whether you can repay, they look at your income and debt ratio. To assess how willing you are 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). We've written more on FICO here.
Your credit score comes from your repayment history. They never take into account your income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding other demographic factors.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score reflects the good and the bad in your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
To get a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your report to build an accurate score. Some people 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.