Your Credit Score: What it means
Before lenders decide to lend you money, they have to know if you're willing and able to pay back that mortgage. To figure out your ability to repay, they assess your debt-to-income ratio. In order to calculate your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. You can find out more about FICO here.
Your credit score is a result of your repayment history. They never take into account income, savings, down payment amount, or personal factors like sex ethnicity, nationality 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 demographic factors.
Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score is calculated from both the good and the bad of your credit history. Late payments lower your credit score, but consistently making future payments on time will raise your score.
To get a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your credit to assign a score. If you don't meet the minimum criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.