A Score that Really Matters: The Credit Score
Before lenders make the decision to lend you money, they have to know if you are willing and able to pay back that mortgage. To figure out your ability to repay, lenders assess your debt-to-income ratio. To calculate your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score is a direct result of your history of repayment. They don't take into account income, savings, amount of down payment, or personal factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score comes from both the good and the bad of your credit history. Late payments count against your score, but a record of paying on time will raise it.
Your 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 credit to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.
First Southeast Mortgage Corporation can answer your questions about credit reporting. Call us: 954.920.9799.