About Your Credit Score
Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to find out two things about you: your ability to repay the loan, and if you will pay it back. To assess your ability to pay back the loan, 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 assess creditworthines. You can find out more on FICO here.
Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's likelihood to pay back a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.
For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your credit to generate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.
At America's Home Loans, we answer questions about Credit reports every day. Give us a call: 701.222.0100.