Your Credit Score: What it means
Before lenders make the decision to lend you money, they want to know that you're willing and able to pay back that mortgage. To figure out your ability to repay, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company developed the first FICO score to assess creditworthines. You can learn more on FICO here.
Credit scores only assess the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to repay a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise it.
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 history ensures that there is sufficient information in your credit to calculate a score. If you don't meet the minimum criteria for getting a score, you may need to work on a credit history prior to applying for a mortgage.
Milestone Mortgage, Inc. NMLS#136714 can answer your questions about credit reporting. Give us a call at 3175959600.