Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to discover two things about you: your ability to repay the loan, and how committed you are to repay the loan. To assess whether you can repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the original FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score is a direct result of your repayment history. They never take into account your income, savings, down payment amount, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was developed as a way to consider only that which was relevant to a borrower's likelihood to repay the lender.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score is based on both the good and the bad of your credit history. Late payments count against you, but a consistent record of paying on time will raise it.
For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to generate a score. Should you not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage loan.
Blue Door Mortgage can answer questions about credit reports and many others. Call us: (617) 527-BLUE(2583).