Your Credit Score: What it means

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Before lenders decide to give you a loan, they want to know that you are willing and able to repay that mortgage loan. To assess your ability to pay back the loan, 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 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only take into account the info in your credit profile. 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 willingness to repay the loan while specifically excluding any other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score considers both 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 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 report to build a score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply for a loan.