Your Credit Score: What it means
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Before deciding on what terms they will offer you a loan, lenders need to discover two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthiness. For details on FICO, read more here.
Your credit score comes from your history of repayment. They never consider income, savings, amount of down payment, or factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding any other personal factors.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score is calculated with both positive and negative items in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your credit report must 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 credit to build a score. Should you not meet the minimum criteria for getting a score, you may need to work on a credit history before you apply for a mortgage loan.