About Your Credit Score
Before lenders make the decision to lend you money, they must know that you are willing and able to repay that loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. In order to calculate your willingness to pay back the loan, they consult your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score is a result of your history of repayment. They don't take into account your income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other demographic factors.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is based on the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your report to calculate a score. Should you not meet the minimum criteria for getting a score, you may need to establish a credit history before you apply for a mortgage.
AmeriBest Mortgage can answer questions about credit reports and many others. Call us at (321) 777-7277.