A Score that Really Matters: The Credit Score
Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to know two things about you: whether you can repay the loan, and if you will pay it back. To assess your ability to pay back the loan, they assess your debt-to-income ratio. In order to calculate your willingness to pay back the loan, they consult 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 assess the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only what was relevant to a borrower's willingness to repay a loan.
Your current debt level, 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 will lower your score, but consistently making future payments on time will improve your score.
To get a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to assign an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.
At BancZone, we answer questions about Credit reports every day. Give us a call: 407-583-6250.