About Your Credit Score
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Before they decide on the terms of your mortgage loan, lenders must discover two things about you: your ability to repay the loan, and if you will pay it back. To understand whether you can pay back the loan, they assess your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.
The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding 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 considers positive and negative information 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 six months of payment history. This payment history ensures that there is enough information in your report to assign an accurate score. Should you not meet the criteria for getting a credit score, you may need to work on a credit history prior to applying for a mortgage loan.