A Score that Really Matters: The Credit Score
Before lenders make the decision to lend you money, they want to know that you're willing and able to repay that mortgage loan. To understand whether you can repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. For details on FICO, read more here.
Credit scores only consider the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to repay a loan.
Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score considers both positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will raise it.
Your report must have 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 calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply for a loan.
First Southeast Mortgage Corporation can answer your questions about credit reporting. Give us a call: 954.920.9799.