Before deciding on what terms they will offer you a mortgage loan, lenders must discover two things about you: your ability to pay back the loan, and if you will pay it back. To understand your ability to repay, 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 developed the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Credit scores only assess the info contained in your credit profile. They don't take into account your income, savings, amount of down payment, or factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to consider solely what was relevant to a borrower's likelihood to repay the lender.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
Your credit report must 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 history ensures that there is sufficient information in your credit to build a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply.
Alternative Mortgage Group can answer your questions about credit reporting. Give us a call at 561-395-4264.