About Your Credit Score
Before lenders make the decision to lend you money, they want to know if you're willing and able to pay back that mortgage. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. We've written more about FICO here.
Credit scores only assess the info contained in your credit reports. They don't take into account your income, savings, down payment amount, or personal factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's willingness to repay a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad of 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 six months of payment history. This history ensures that there is sufficient information in your report to generate an accurate score. If you don't meet the criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage.
At America's Home Loans, we answer questions about Credit reports every day. Call us: 701.222.0100.