About Your Credit Score

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Before lenders decide to give you a loan, they need to know if you're willing and able to pay back that loan. To assess whether you can repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely 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). We've written a lot more about FICO here.

Credit scores only assess the info in your credit reports. They never consider income, savings, amount of down payment, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to pay back a loan.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score is calculated from the good and the bad in your credit report. Late payments count against your score, but a record of paying on time will raise it.

Your report should have 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 calculate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage.




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