About Your Credit Score
Before they decide on the terms of your mortgage loan (which they base on their risk), lenders must find out two things about you: your ability to repay the loan, and your willingness to pay back the loan. To figure out 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 developed the first FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's likelihood to pay back a loan.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score is calculated from the good and the bad of your credit report. Late payments count against your score, but a record of paying on time will raise it.
Your 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 credit to build an accurate score. If you don't meet the criteria for getting a score, you might need to establish your credit history before you apply for a mortgage loan.
Community Trust Lending Team at Norcom Mortgage-NMLS ID#71655 can answer your questions about credit reporting. Give us a call: (203) 526-9345.