Credit Scores

Before lenders decide to lend you money, they need to know that you are willing and able to repay that mortgage. To figure out your ability to repay, lenders assess your debt-to-income ratio. To calculate your willingness to repay the 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. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more about FICO here.

Credit scores only consider the info in your credit profile. They never take into account your income, savings, amount of down payment, or personal factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's likelihood to repay a loan.

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

Your report should have 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 enough information in your report to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you may need to work on your credit history before you apply for a mortgage.