About Your Credit Score
Before lenders make the decision to give you a loan, they want to know if you are willing and able to pay back that mortgage loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company formulated the first FICO score to assess creditworthines. We've written a lot more about FICO here.
Your credit score is a result of your repayment history. They never take into account income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was invented as a way to consider solely what was relevant to a borrower's likelihood to repay the lender.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative items in your credit report. Late payments 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, 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 build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.
Halpern & Associates Mortgage Corporation can answer your questions about credit reporting. Call us: (305) 535-2230.