About Your Credit Score
Before they decide on the terms of your loan (which they base on their risk), lenders must find out two things about you: whether you can pay back the loan, and if you are willing to pay it back. To assess whether you can repay, they assess your income and debt ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.
Fair Isaac and Company built the first FICO score to assess creditworthines. You can find out more on FICO here.
Credit scores only assess the information contained in your credit profile. They never consider your income, savings, down payment amount, or demographic factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's willingness to repay a loan.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score is calculated from both the good and the bad in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.
For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is enough information in your credit to generate a score. Some borrowers 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.
Blue Door Mortgage can answer questions about credit reports and many others. Give us a call at (617) 527-BLUE(2583).