Before they decide on the terms of your mortgage loan (which they base on their risk), lenders must discover two things about you: your ability to repay the loan, and if you are willing to pay it back. To understand your ability to repay, they look at your income and debt ratio. To calculate your willingness to pay back the loan, they look at your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. You can learn more about FICO here.
Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is now. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding any other irrelevant factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score results from both positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your 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 sufficient information in your credit to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.
Executive Lending Group, LLC can answer questions about credit reports and many others. Call us: (816) 525-8000 & (81.
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