Before deciding on what terms they will offer you a mortgage loan, lenders need to find out two things about you: whether you can pay back the loan, and your willingness to repay the loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the first FICO score to assess creditworthines. For details on FICO, read more here.
Credit scores only assess the information in your credit reports. They don't consider your income, savings, down payment amount, or factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was invented as a way to consider only what was relevant to a borrower's likelihood to pay back a loan.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments lower your 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 credit to assign an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.
At Bright Vision Mortgage, we answer questions about Credit reports every day. Give us a call: (904) 342-3622.