Your Credit Score: What it means
Before lenders make the decision to lend you money, they must know if you are willing and able to repay that mortgage. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company developed the original FICO score to help lenders assess creditworthines. You can learn more about FICO here.
Credit scores only assess the information contained in your credit profile. They don't consider income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was developed to assess willingness to repay the loan without considering any other personal factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score reflects both the good and the bad of your credit report. Late payments count against your score, but a record of paying on time will improve it.
To get a credit score, you 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 generate an accurate score. Should you not meet the criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.
The Rate Kings Mortgage LLC can answer questions about credit reports and many others. Call us: 6105723635.