Before lenders decide to lend you money, they have to know if you're willing and able to repay that mortgage. To understand your ability to pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to repay the loan, they look at your credit score.
The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.
Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay while specifically excluding any other demographic factors.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad of your credit history. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
To get 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 generate an accurate score. Should you not meet the criteria for getting a credit score, you might need to work on a credit history prior to applying for a mortgage loan.
At First Southeast Mortgage Corporation, we answer questions about Credit reports every day. Call us: 954.920.9799.