A Score that Really Matters: The Credit Score
Before lenders decide to give you a loan, they must know that you're willing and able to pay back that mortgage loan. To assess your ability to repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Credit scores only take into account the information contained in your credit profile. They never take into account income, savings, down payment amount, or personal factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to pay without considering other personal factors.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score comes from both the good and the bad in your credit history. Late payments count against you, but a record of paying on time will raise it.
To get a credit score, borrowers must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your report to build an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.