Before lenders make the decision to lend you money, they must know that you are willing and able to repay that loan. To assess your ability to pay back the loan, lenders look at your debt-to-income 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 learn more about FICO here.
Credit scores only consider the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay without considering any other irrelevant factors.
Past delinquencies, 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 is based on both the good and the bad in your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.
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 enough information in your credit to calculate a score. If you don't meet the criteria for getting a score, you may need to work on a credit history prior to applying for a mortgage loan.
1st Credential Mortgage Inc can answer your questions about credit reporting. Call us: (281) 778-0805.