About Your Credit Score
Before lenders decide to give you a loan, they have to know if you are willing and able to repay that loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To calculate your willingness to repay the mortgage loan, they consult your credit score.
The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written more on FICO here.
Credit scores only consider the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other personal factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.
For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your credit to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.
Mutual Security Mortgage can answer questions about credit reports and many others. Give us a call at (303) 931-7879.