Before lenders decide to lend you money, they want to know if you are willing and able to pay back that mortgage loan. To understand your ability to repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to help lenders assess creditworthines. We've written a lot more on FICO here.
Credit scores only take into account the info contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other personal factors.
Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score is based on the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will improve it.
Your report must 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 payment history ensures that there is enough information in your credit to calculate an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage.
Savers Home Loans can answer questions about credit reports and many others. Give us a call at (800) 974-0509.