A Score that Really Matters: Your Credit Score

Before lenders decide to give you a loan, they have to know that you are willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthiness. We've written a lot more on FICO here.

Your credit score is a result of your repayment history. They don't take into account income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

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