Your Credit Score: What it means
Before lenders make the decision to give you a loan, they need to know that you are willing and able to pay back that mortgage. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company calculated the original FICO score to assess creditworthines. We've written a lot more about FICO here.
Credit scores only consider the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other personal factors.
Your current debt level, 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 count against you, but a record of paying on time will improve it.
Your credit report should contain 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 history ensures that there is enough information in your report to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building up a credit history before they apply.
Prime Capital Mortgage Corp can answer questions about credit reports and many others. Call us at 248-644-1200.
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