A Score that Really Matters: The Credit Score
Before lenders make the decision to give you a loan, they need to know that you're willing and able to repay that loan. To assess whether you can pay back the loan, they assess your income and debt ratio. To calculate your willingness to repay the mortgage loan, they look at 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 take into account income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to repay a loan.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from both the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.
To get a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to assign a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply.
The Mortgage Exchange Service LLC can answer questions about credit reports and many others. Call us: 703.255-5810.