Your Credit Score: What it means
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Before lenders make the decision to lend you money, they want to know that you are willing and able to repay that loan. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to calculate your willingness to pay back the loan, they consult 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). You can find out more on FICO here.
Credit scores only consider the info contained in your credit profile. They do not consider income, savings, down payment amount, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering other demographic factors.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score reflects both the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
Your report must 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 history ensures that there is enough information in your credit to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply for a loan.