Your Credit Score: What it means
Before lenders make the decision to give you a loan, they want to know that you're willing and able to pay back that mortgage loan. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company built the first 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. 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 load, past late payments, length of your credit history, and other factors are considered. Your score is based on the good and the bad of your credit history. Late payments count against you, but a record of paying on time will improve it.
Your credit 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 enough information in your credit to assign a score. Should you not meet the criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.
Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer your questions about credit reporting. Call us at 214-663-5355.