About Your Credit Score
Before lenders make the decision to give you a loan, they want to know if you are willing and able to repay that mortgage. To assess 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 original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score is a result of your history of repayment. They don't take into account your income, savings, down payment amount, or demographic factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score reflects both the good and the bad of your credit report. Late payments count against your score, but a record of paying on time will raise it.
Your 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 history ensures that there is sufficient information in your report to generate a score. Should you not meet the criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage loan.
At America's Money Source, we answer questions about Credit reports every day. Call us: 4078987559.