Before lenders decide to lend you money, they have to know if you are willing and able to repay that mortgage loan. To assess whether you can pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Credit scores only take into account the information in your credit profile. They do not consider your income, savings, amount of down payment, or personal factors like gender, race, national origin 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 in the present day. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's likelihood to pay back a loan.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score results from both positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.
For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to generate an accurate score. Some folks 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.
Bright Vision Mortgage can answer questions about credit reports and many others. Give us a call at (904) 342-3622.