Before lenders decide to lend you money, they must know that you're willing and able to repay that loan. To assess your ability to repay, lenders assess your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.
The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more about FICO here.
Credit scores only consider the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to pay back a loan.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.
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 enough information in your report to assign a score. Should you not meet the minimum criteria for getting a score, you may need to work on your credit history prior to applying for a mortgage.
PREMIERE MORTGAGE SERVICES, INC. can answer your questions about credit reporting. Call us at 978-422-2311.