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Before they decide on the terms of your loan, lenders need to know two things about you: your ability to repay the loan, and if you are willing to pay it back. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthiness. For details on FICO, read more here.
Credit scores only assess the info in your credit profile. They never take into account income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other irrelevant factors.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score results from positive and negative items in your credit report. Late payments count against your score, but a 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 enough information in your report to generate a score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.