Your Credit Score: What it means
Before lenders decide to lend you money, they have to know if you are willing and able to pay back that mortgage loan. To understand whether you can repay, they assess your income and debt ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. You can find out more about 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 now. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other personal factors.
Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score is based on both the good and the bad in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
To get a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to generate a score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.
Savers Home Loans can answer questions about credit reports and many others. Give us a call: (800) 974-0509.