Before lenders decide to give you a loan, they need to know if you're willing and able to repay that mortgage loan. To understand whether you can repay, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay without considering any other personal factors.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score reflects both the good and the bad in your credit history. Late payments lower your score, but consistently making future payments on time will raise your score.
Your credit report should 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 enough information in your report to assign a score. If you don't meet the criteria for getting a score, you may need to establish your credit history before you apply for a mortgage loan.
Milestone Mortgage, Inc. NMLS#136714 can answer questions about credit reports and many others. Give us a call at 3175959600.