A Score that Really Matters: Your Credit Score
Before they decide on the terms of your loan (which they base on their risk), lenders need to find out two things about you: your ability to repay the loan, and your willingness to repay the loan. To figure out your ability to repay, they assess your debt-to-income ratio. To assess how willing you are 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 comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's likelihood to repay the lender.
Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score considers both positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.
Your credit 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 history ensures that there is sufficient information in your report to build a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.
First Place Mortgage LLC can answer questions about credit reports and many others. Call us: 623-972-6432.