Your Credit Score: What it means
Before lenders make the decision to give you a loan, they have to know that you're willing and able to pay back that loan. 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 formulated the original FICO score to assess creditworthines. For details on FICO, read more here.
Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated from both the good and the bad of your credit history. Late payments count against you, but a consistent record of paying on time will improve it.
To get a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to build a score. Should you not meet the minimum criteria for getting a score, you may need to work on your credit history before you apply for a mortgage.
Halpern & Associates Mortgage Corporation can answer your questions about credit reporting. Give us a call at (305) 535-2230.