A Score that Really Matters: The Credit Score
Before lenders decide to lend you money, they have to know if you're willing and able to pay back that mortgage. To assess your ability to repay, they look at your debt-to-income ratio. In order to assess your willingness to pay back the loan, they look at your credit score.
Fair Isaac and Company built the original FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score is a direct result of your history of repayment. They do not take into account income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to pay back the lender.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score is calculated from the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.
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 credit to build a score. Some folks don't have a long enough credit history to get a credit score. They should build up credit history before they apply.
At First Southeast Mortgage Corporation, we answer questions about Credit reports every day. Give us a call at 954.920.9799.