Before lenders make the decision to give you a loan, they have to know that you are willing and able to repay that mortgage loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
To get a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.
Tenby J. Dahman can answer your questions about credit reporting. Give us a call at 3038627760.