Your Credit Score: What it means

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

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only assess the information in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to consider solely what 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 is calculated from both the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage.