Your Credit Score: What it means

Before lenders make the decision to give you a loan, they need to know that you are willing and able to pay back that loan. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use 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 (very high risk) to 850 (low risk). You can learn more about FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. 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.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to build a score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.