About Your Credit Score
Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that mortgage. To assess your ability to pay back the loan, they assess your income and debt ratio. To calculate your willingness to pay back the loan, they consult your credit score.
The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written more about FICO here.
Credit scores only consider the info in your credit profile. They never consider your income, savings, down payment amount, or demographic factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other personal factors.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.
To get a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to generate a score. If you don't meet the criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage loan.
At Executive Lending Group, we answer questions about Credit reports every day. Give us a call at (405) 615-8543.