A Score that Really Matters: The Credit Score
Before lenders make the decision to give you a loan, they want to know if you're willing and able to repay that mortgage. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.
Credit scores only consider the info in your credit reports. They never take into account income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to take into account solely that which was relevant to a borrower's likelihood to repay a loan.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad in your credit history. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your report must 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 credit to generate an accurate score. Should you not meet the criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage.
Alternative Mortgage Group can answer your questions about credit reporting. Call us at 561-395-4264.