A Score that Really Matters: The Credit Score
Before lenders make the decision to lend you money, they need to know that you are willing and able to repay that loan. To assess your ability to pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Credit scores only take into account the information contained in your credit profile. They don't take into account your income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.
To get a credit score, you must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your report to build a score. Should you not meet the criteria for getting a credit score, you might need to establish your credit history prior to applying for a mortgage.
Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer your questions about credit reporting. Give us a call at 214-663-5355.