Your Credit Score: What it means

Before they decide on the terms of your mortgage loan, lenders want to discover two things about you: whether you can pay back the loan, and if you are willing to pay it back. To assess your ability to repay, they assess your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company developed the original FICO score to help lenders assess creditworthiness. For details on FICO, read more here.

Your credit score is a result of your history of repayment. They do not take into account your income, savings, amount of down payment, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's likelihood to repay a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score reflects the good and the bad of your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit report should contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This history ensures that there is sufficient information in your report to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.