About Your Credit Score
Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders want to discover two things about you: your ability to pay back the loan, and your willingness to repay the loan. To assess your ability to repay, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was envisioned as a way to assess willingness to pay without considering other demographic factors.
Past delinquencies, payment behavior, 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 lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
To get 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 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 may need to spend a little time building up a credit history before they apply.
Price Mortgage Group LLC can answer questions about credit reports and many others. Call us at 405-513-7700.