Before deciding on what terms they will offer you a mortgage loan, lenders want to discover two things about you: whether you can pay back the loan, and your willingness to repay the loan. To assess your ability to repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company developed the first FICO score to assess creditworthines. You can find out more on FICO here.
Credit scores only take into account the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding any other demographic factors.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative items in your credit report. Late payments count against you, but a record of paying on time will improve 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 credit to build a score. If you don't meet the criteria for getting a score, you might need to work on your credit history before you apply for a mortgage.
Custom Lending Group can answer questions about credit reports and many others. Call us: (707) 252-2700.