Your Credit Score: What it means

Before they decide on the terms of your mortgage loan, lenders must find out two things about you: your ability to repay the loan, and if you are willing to pay it back. To assess your ability to repay, lenders look at your debt-to-income ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthiness. You can find out more on FICO here.

Credit scores only assess the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score comes from both the good and the bad of your credit history. Late payments lower your credit score, but consistently making future payments on time will raise your score.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to assign an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.