Before lenders make the decision to give you a loan, they want to know that you're willing and able to pay back that mortgage. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated 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. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.
To get a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your credit to generate an accurate score. Should you not meet the criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage.
Financial Edge Mortgage Corp. can answer your questions about credit reporting. Call us at 425-508-9988.
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