Before lenders make the decision to lend you money, they must know if you're willing and able to repay that loan. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.
The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written more on FICO here.
Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is now. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's likelihood to repay the lender.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments count against your score, 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 payment history ensures that there is sufficient information in your report to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on your credit history prior to applying for a mortgage.
PREMIERE MORTGAGE SERVICES, INC. can answer questions about credit reports and many others. Call us at 978-422-2311.