Before lenders decide to lend you money, they must know if you are willing and able to repay that mortgage. To assess your ability to repay, they assess your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.
Fair Isaac and Company developed the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score comes from your repayment history. 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 FICO scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding any other demographic factors.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.
To get a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your credit to calculate an accurate score. If you don't meet the criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.
At Executive Lending Group, LLC, we answer questions about Credit reports every day. Call us at (816) 525-8000.
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