Credit Scores

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Before lenders decide to give you a loan, they need to know that you're willing and able to repay that mortgage loan. To assess your ability to repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthiness. You can learn more on FICO here.

Your credit score is a direct result of your repayment history. They do not consider your income, savings, amount of down payment, or factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score comes from both the good and the bad of your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your report to assign a score. If you don't meet the criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.