Before lenders make the decision to give you a loan, they must know if you are willing and able to repay that loan. To understand whether you can repay, they assess your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.
Fair Isaac and Company developed the original FICO score to help lenders assess creditworthines. You can find out more about FICO here.
Credit scores only consider the information in your credit profile. They don't consider income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to repay a loan.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score results from both positive and negative items in your credit report. Late payments count against your score, but a 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 enough information in your report to build a score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply for a loan.
Price Mortgage Group LLC can answer questions about credit reports and many others. Give us a call at 405-513-7700.