Before lenders decide to lend you money, they want to know if you are willing and able to pay back that mortgage loan. To assess whether you can pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other personal factors.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative information in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.
Your credit report must contain 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 report to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply for a loan.
Custom Lending Group can answer your questions about credit reporting. Give us a call: (707) 252-2700.