Before they decide on the terms of your mortgage loan, lenders must find out two things about you: your ability to pay back the loan, and your willingness to repay the loan. To understand whether you can pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to repay the loan, they consult your credit score.
Fair Isaac and Company formulated 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 your income, savings, down payment amount, or factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering other irrelevant factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score is calculated from both the good and the bad in your credit history. Late payments will lower your score, but consistently making future payments on time will improve your score.
Your credit report must 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 enough information in your report to generate 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 credit history before they apply.
At PREMIERE MORTGAGE SERVICES INC., we answer questions about Credit reports every day. Call us at 978-422-2311.
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