Your Credit Score: What it means
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Before lenders make the decision to lend you money, they have to know if you are willing and able to pay back that mortgage loan. To understand whether you can pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company developed the original FICO score to help lenders assess creditworthiness. You can find out more about FICO here.
Your credit score is a direct result of your repayment history. They don't take into account your income, savings, down payment amount, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was developed as a way to consider only what was relevant to a borrower's likelihood to repay a loan.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score is calculated with positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to assign an accurate score. Should you not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.