About Your Credit Score
Before lenders make the decision to give you a loan, they need to know if you are willing and able to pay back that mortgage. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. You can learn more about FICO here.
Your credit score comes from your history of repayment. They do not take into account income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to take into account solely that which was relevant to a borrower's likelihood to pay back the lender.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score reflects the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.
For the agencies to calculate a credit score, you must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your credit to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.
Custom Lending Group can answer questions about credit reports and many others. Give us a call at (707) 252-2700.