Your Credit Score: What it means
Before lenders make the decision to give you a loan, they need to know if you're willing and able to pay back that mortgage. To assess whether you can pay back the loan, they look at your income and debt ratio. In order to assess your willingness to pay back the loan, they look at your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score comes from your repayment history. They do not consider your income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these 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 irrelevant factors.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score reflects both the good and the bad in your credit report. Late payments count against you, but a record of paying on time will raise it.
Your report should 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 payment history ensures that there is sufficient information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.
Carter Financial Solutions can answer your questions about credit reporting. Give us a call: 866-840-8745 x2.
Got a Question?
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.