About Your Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders want to discover two things about you: your ability to repay the loan, and how committed you are to repay the loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult 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 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's likelihood to repay a loan.

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

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to calculate a score. Should you not meet the criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage loan.