Before they decide on the terms of your mortgage loan, lenders want to find out two things about you: your ability to pay back the loan, and how committed you are to pay back the loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. You can find out more on FICO here.
Your credit score is a direct result of your repayment history. They never consider your income, savings, down payment amount, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to pay without considering other demographic factors.
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 scoring. Your score is calculated from the good and the bad in your credit history. Late payments count against your score, but a record of paying on time will raise it.
Your credit 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 enough information in your credit to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.
At Executive Lending Group, we answer questions about Credit reports every day. Give us a call: 4056158543.