Your Credit Score: What it means
Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to find out two things about you: your ability to repay the loan, and if you will pay it back. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on 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. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay without considering any other irrelevant factors.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score comes from both the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
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 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.