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Before lenders decide to lend you money, they want to know that you're willing and able to pay back that mortgage. To assess your ability to pay back the loan, 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 called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). I've written a lot more about FICO here.
Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad in your credit history. Late payments count against you, but a 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 report to assign a score. Some folks don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.
If you have a question about your credit report please click here so that I can read your credit scenario! I can answer your questions about credit reporting. Call me at 800-506-0632.