About Your Credit Score
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Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must find out two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to repay, lenders look at your debt-to-income ratio. To calculate your willingness to repay the loan, they consult your credit score.
Fair Isaac and Company built the original FICO score to help lenders assess creditworthiness. We've written a lot more about FICO here.
Credit scores only take into account the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other personal factors.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score reflects both the good and the bad of your credit history. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your credit report must 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 generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up credit history before they apply for a loan.