Before deciding on what terms they will offer you a mortgage loan, lenders must discover two things about you: whether you can pay back the loan, and your willingness to repay the loan. To assess your ability to pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company calculated the original FICO score to assess creditworthines. We've written more on FICO here.
Your credit score comes from your history of repayment. They never take into account income, savings, down payment amount, or personal factors like sex ethnicity, nationality or marital status. 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 developed as a way to consider only that which was relevant to a borrower's willingness to pay back a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to generate an accurate score. If you don't meet the criteria for getting a score, you may need to work on a credit history before you apply for a mortgage.
At 1st Credential Mortgage Inc, we answer questions about Credit reports every day. Call us: (281) 778-0805.