A Score that Really Matters: The Credit Score
Before lenders decide to give you a loan, they need to know if you are willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company developed the original FICO score to assess creditworthines. For details on FICO, read more here.
Credit scores only take into account the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's willingness to pay back 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 scores. Your score considers positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.
To get a credit score, you 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 generate a score. Should you not meet the minimum criteria for getting a credit score, you might need to work on your credit history before you apply for a mortgage loan.
Capacity Lending, LLC can answer questions about credit reports and many others. Give us a call: 469-640-0400.