About Your Credit Score
Before lenders decide to give you a loan, they need to know that you're willing and able to pay back that mortgage. To assess whether you can pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering other personal factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.
Your credit 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 history ensures that there is sufficient information in your report to build an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to work on your credit history before you apply for a mortgage loan.
At 1st Credential Mortgage Inc, we answer questions about Credit reports every day. Call us at (281) 778-0805.