Before lenders decide to give you a loan, they must know that you're willing and able to repay that loan. To understand your ability to pay back the loan, they assess your income and debt ratio. In order to assess your willingness to pay back the loan, they look at 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 comes from your repayment history. They never consider your income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other irrelevant factors.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your report must have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is enough information in your credit to calculate an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage loan.
F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org) can answer your questions about credit reporting. Give us a call: 214-300-8756.