About Your Credit Score
Before lenders decide to give you a loan, they need to know if you're willing and able to pay back that mortgage loan. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.
Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.
Credit scores only consider the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to pay without considering other irrelevant factors.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from positive and negative items in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.
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 report to generate an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage.
America's Home Loans can answer questions about credit reports and many others. Call us: 701.222.0100.