Before lenders decide to give you a loan, they want to know if you are willing and able to repay that loan. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company calculated the original FICO score to assess creditworthines. You can learn more about FICO here.
Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider only that which was relevant to a borrower's willingness to pay back a loan.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score is calculated from the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will improve 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 payment history ensures that there is sufficient information in your report to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply for a loan.
Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about credit reports and many others. Give us a call: 214-663-5355.