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 loan. To understand whether you can pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company formulated the original FICO score to assess creditworthines. We've written a lot more about FICO here.
Credit scores only consider the info contained in your credit profile. They do not take into account your income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's likelihood to repay the lender.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from the good and the bad of your credit report. Late payments count against you, but a record of paying on time will raise it.
Your credit 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 history ensures that there is enough information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on a credit history prior to applying for a mortgage loan.
At Savers Home Loans, we answer questions about Credit reports every day. Give us a call at (800) 974-0509.