Before lenders make the decision to give you a loan, they need to know that you are willing and able to pay back that mortgage loan. To understand your ability to repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's willingness to repay the lender.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated from 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 raise your score.
Your credit report should have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This history ensures that there is enough information in your credit to assign an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage loan.
At Blue Door Mortgage, we answer questions about Credit reports every day. Give us a call: (617) 527-BLUE(2583).