A Score that Really Matters: Your Credit Score
Before lenders make the decision to lend you money, they must know if you are willing and able to repay that mortgage. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. We've written more about FICO here.
Your credit score is a result of your history of repayment. They don't consider your income, savings, amount of down payment, or demographic factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's willingness to repay the lender.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.
Your 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 payment history ensures that there is enough information in your credit to build a score. If you don't meet the criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage loan.
At 1st Credential Mortgage Inc, we answer questions about Credit reports every day. Give us a call: (281) 778-0805.