Before lenders make the decision to lend you money, they need to know if 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 calculate your willingness to repay the mortgage loan, they look at your credit score.
The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a result of your repayment history. They never take into account your income, savings, amount of down payment, or personal factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only what was relevant to a borrower's willingness to pay back a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
Your credit report must have 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 payment history ensures that there is sufficient information in your credit to build an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.
Mutual Security Mortgage can answer questions about credit reports and many others. Call us: (303) 931-7879.