Before deciding on what terms they will offer you a mortgage loan, lenders must know two things about you: whether you can repay the loan, and your willingness to repay the loan. To assess your ability to pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.
Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was invented as a way to take into account only what was relevant to a borrower's likelihood to repay the lender.
Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score considers positive and negative information in your credit report. Late payments count against you, but a 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 payment history ensures that there is sufficient information in your report to generate a score. If you don't meet the criteria for getting a credit score, you may need to establish your credit history prior to applying for a mortgage.
At Reliance Mortgage Service, Inc, we answer questions about Credit reports every day. Call us at 562 320-0510.