About Your Credit Score
Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that mortgage loan. To assess whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated 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 history of repayment. They do not take into account income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "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 consider only that which was relevant to a borrower's likelihood to repay the lender.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.
To get a credit score, borrowers 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 report to calculate 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.
Custom Lending Group can answer your questions about credit reporting. Call us at (707) 252-2700.