About Your Credit Score
Before they decide on the terms of your loan (which they base on their risk), lenders want to know two things about you: whether you can pay back the loan, and your willingness to pay back the loan. To assess whether you can pay back the loan, they assess your income and debt ratio. In order to assess your willingness to pay back the loan, they consult your credit score.
Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Credit scores only take into account the info contained in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other demographic factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score reflects both the good and the bad of your credit history. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.
Your report should contain 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 report to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply for a loan.
At Alternative Mortgage Group, we answer questions about Credit reports every day. Give us a call: 561-395-4264.