Before they decide on the terms of your loan, lenders need to discover two things about you: your ability to pay back the loan, and your willingness to pay back the loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written more about FICO here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to repay a loan.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score is based on both the good and the bad in your credit report. Late payments count against your score, but a record of paying on time will raise it.
Your report should 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 sufficient information in your report to build a score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.