About Your Credit Score
Before lenders decide to lend you money, they need to know that you're willing and able to pay back that mortgage loan. To understand whether you can pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.
Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other demographic factors.
Past delinquencies, derogatory 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 items in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
Your credit report should 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 payment history ensures that there is sufficient information in your report to assign a score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply for a loan.
At America's Money Source, we answer questions about Credit reports every day. Call us at 4078987559.