About Your Credit Score
Before lenders decide to give you a loan, they have to know that you are willing and able to repay that mortgage loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the first FICO score to assess creditworthines. You can find out more about FICO here.
Your credit score is a result of your repayment history. They never consider income, savings, down payment amount, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other demographic factors.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.
For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your report to generate a score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage.
At 1st Credential Mortgage Inc, we answer questions about Credit reports every day. Call us at (281) 778-0805.