Before lenders decide to give you a loan, they want to know that you're willing and able to pay back that loan. To assess your ability to pay back the loan, they look at your income and debt ratio. To assess your willingness 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.
Credit scores only take into account the info in your credit profile. They do not take into account income, savings, amount of down payment, or demographic factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other irrelevant factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise 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 history ensures that there is enough information in your credit to assign an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage loan.
Mutual Security Mortgage can answer your questions about credit reporting. Call us at (303) 931-7879.