Credit Scoring

Before they decide on the terms of your loan (which they base on their risk), lenders want to know two things about you: your ability to repay the loan, and your willingness to pay back the loan. To assess your ability to pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.
The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very 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. 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 likelihood to pay back a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will improve it.
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 payment history ensures that there is enough information in your report to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building credit history before they apply for a loan.
At American Mortgage Advisers, Inc, we answer questions about Credit reports every day. Call us at 2148657442.