A Score that Really Matters: The Credit Score
Before lenders make the decision to lend you money, they want to know that you are willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company developed the original FICO score to assess creditworthines. You can learn more on FICO here.
Your credit score comes from your history of repayment. They do not take into account your income, savings, amount of down payment, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's likelihood to pay back the lender.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit history. Late payments count against your score, but a record of paying on time will raise it.
Your report must have 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 sufficient information in your report to build a score. Should you not meet the criteria for getting a credit score, you may need to establish a credit history before you apply for a mortgage.
1st Credential Mortgage Inc can answer questions about credit reports and many others. Give us a call at (281) 778-0805.