About Your Credit Score

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Before lenders make the decision to give you a loan, they want to know if you are willing and able to repay that mortgage. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. In order 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 Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more about FICO here.

Credit scores only take into account the info in your credit profile. They don't consider income, savings, down payment amount, or personal factors like sex ethnicity, national origin or marital status. 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 now. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to repay a loan.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score results from positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your report to calculate a score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

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