Your Credit Score: What it means
Before lenders decide to lend you money, they have to know if you are willing and able to repay that mortgage. To assess your ability to repay, lenders assess your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company built the original FICO score to assess creditworthines. For details on FICO, read more here.
Credit scores only take into account the information in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is today. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's likelihood to repay a loan.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score results from both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will improve it.
For the agencies to calculate a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply.
At First Southeast Mortgage Corporation, we answer questions about Credit reports every day. Give us a call at 954.920.9799.