About Your Credit Score

Before they decide on the terms of your loan, lenders must find out two things about you: whether you can repay the loan, and if you will pay it back. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only assess the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other personal factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated with both positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

To get a credit score, you 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 assign an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.