Before lenders make the decision to lend you money, they want to know that you're willing and able to repay that mortgage. To figure out your ability to repay, they assess your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.
The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other irrelevant factors.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad of 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 enough information in your report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up credit history before they apply for a loan.
At Reliance Mortgage Service, Inc, we answer questions about Credit reports every day. Call us: 562 320-0510.