Your Credit Score: What it means

Before lenders make the decision to lend you money, they want to know if you're willing and able to repay that mortgage loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score is calculated from both the good and the bad in your credit history. 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 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 payment history ensures that there is enough information in your credit to build a score. Some people don't have a long enough credit history to get a credit score. They may need to spend some time building a credit history before they apply.