Your Credit Score: What it means
Before lenders decide to lend you money, they must know that you're willing and able to repay that mortgage loan. To assess your ability to repay, they look at your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.
Fair Isaac and Company built the first FICO score to assess creditworthines. You can learn more on FICO here.
Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other personal factors.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score results from both positive and negative information in your credit report. Late payments lower your credit score, but consistently making future 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 history ensures that there is sufficient 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 spend some time building credit history before they apply for a loan.
Moonstar Mortgage can answer questions about credit reports and many others. Give us a call: 847-278-7220.