About Your Credit Score

Before lenders make the decision to lend you money, they have to know if you are willing and able to repay that mortgage loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

The most widely 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). You can find out more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were invented as it is today. Credit scoring was envisioned as a way to assess willingness to pay without considering any other irrelevant factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score results from positive and negative items in 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, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your credit to assign an accurate score. Should you not meet the criteria for getting a score, you may need to establish a credit history before you apply for a mortgage.