Before deciding on what terms they will offer you a loan (which they base on their "risk"), lenders want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your debt-to-income ratio. For your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. FICO scores run between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the reason they don't consider demographic factors is why they were invented in the first place. Credit scoring was developed as a way to consider only what was relevant to somebody's willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Different portions of your credit history are given different weights. For example:

• 35% of your FICO score is based on your specific payment history. Obviously, making late payments or having collections will lower your score. Making them on time will raise your score. Be careful if you have old collections though, as paying them can drop your score by bring the debt current.

• 30% is your current level of indebtedness. It is best to keep the balance of your credit cards and installment loans at or below 30% of your limit. This is why transferring all debt from multiple cards onto one can lower your score.

• 15% is the time your open credit has been in use (ten year old accounts are good, six month old ones aren't as good).

• 10% is based on the types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Having a variety of credit is best.  

• The last 10% is based on the number of credit inquiries that have been made in the past 12 months for new credit. Multiple inquiries for credit can lower your score so be careful as to who you allow to check it. If you are shopping for a mortgage or car loan, you are allowed a 14 day window to have your credit pulled an unlimited amount so that you may shop for credit.

Your credit report must 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 ensures that there is enough information in your report to generate an accurate score.

If you have credit issues or no credit at all we still may be able to find a loan to suit your needs, however your rate may not be as low as someone with polished credit.

If you enjoyed this page, click on the "free reports" button or the "video tips" button at the top of the screen. There you will find more information on credit and how to repair it or improve your score.