Before lenders make the decision to lend you money, they must know if you are willing and able to pay back that loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to pay back the loan, they look at your credit score.
Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score comes from your history of repayment. 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 invented as it is now. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to pay back a loan.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.
To get a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is enough information in your report to generate a score. If you don't meet the criteria for getting a credit score, you may need to work on a credit history prior to applying for a mortgage.
Washingtonian Mortgage, LLC can answer your questions about credit reporting. Call us at 4433365525.