About Your Credit Score
Before they decide on the terms of your loan (which they base on their risk), lenders need to know two things about you: whether you can repay the loan, and if you are willing to pay it back. To assess 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 formulated the first FICO score to assess creditworthines. You can learn more on FICO here.
Your credit score comes from your history of repayment. They do not take into account income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess willingness to pay without considering other personal factors.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from both positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a score, you may need to work on a credit history before you apply for a mortgage loan.
Reliance Mortgage Service, Inc can answer your questions about credit reporting. Call us: 562 320-0510.