A Score that Really Matters: Your Credit Score
Before lenders decide to give you a loan, they must know if you're willing and able to repay that mortgage. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are 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. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more on FICO here.
Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score considers positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is enough information in your report to generate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply.