Before lenders decide to give you a loan, they want to know that you are willing and able to repay that mortgage loan. To assess your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.
Credit scores only assess the information contained in your credit profile. They don't consider your income, savings, amount of down payment, or demographic factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's likelihood to repay the lender.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will improve it.
To get a credit score, you 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 build a score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.
Capacity Lending, LLC can answer your questions about credit reporting. Give us a call at 469-640-0400.