Before lenders make the decision to give you a loan, they need to know if you are willing and able to pay back that mortgage loan. To figure out your ability to repay, lenders assess your debt-to-income ratio. To assess 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. You can learn more about FICO here.
Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was developed as a way to consider only what was relevant to a borrower's likelihood to repay a loan.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score considers both positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your 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 enough information in your credit to build a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.
Mutual Security Mortgage can answer your questions about credit reporting. Give us a call at (303) 931-7879.