Before lenders make the decision to give you a loan, they must know that you're willing and able to pay back that mortgage loan. To understand your ability to repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.
Credit scores only take into account the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to pay without considering any other demographic factors.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score reflects the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.
To get a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to calculate a score. Should you not meet the criteria for getting a credit score, you might need to establish your credit history prior to applying for a mortgage loan.
At Price Mortgage Group LLC, we answer questions about Credit reports every day. Call us: 405-513-7700.