Before lenders decide to lend you money, they must know that you are willing and able to pay back that loan. To assess your ability to repay, they look at your income and debt ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.
Fair Isaac and Company developed the first FICO score to assess creditworthines. We've written more about FICO here.
Credit scores only assess the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's likelihood to repay a loan.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score considers both positive and negative items in your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.
Your credit report should 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 sufficient information in your credit to assign a score. If you don't meet the minimum criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage.
Price Mortgage Group LLC can answer your questions about credit reporting. Call us at 405-513-7700.