About Your Credit Score
Before lenders make the decision to lend you money, they need to know that you are willing and able to pay back that mortgage loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to pay back the loan, they look at your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Credit scores only consider the information in your credit reports. They never consider your income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding other irrelevant factors.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score reflects both the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will improve it.
For the agencies to calculate a credit score, you 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 an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply.
The Rate Kings Mortgage LLC can answer your questions about credit reporting. Give us a call: (610) 572-3635.