About Your Credit Score

Before lenders decide to lend you money, they want to know if you are willing and able to pay back that mortgage loan. To assess whether you can repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more about FICO here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to repay a loan.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score is calculated with both positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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