About Your Credit Score
Before deciding on what terms they will offer you a mortgage loan, lenders must know two things about you: your ability to pay back the loan, and if you will pay it back. To assess your ability to repay, lenders assess your debt-to-income ratio. In order to calculate your willingness to repay the loan, they look at your credit score.
Fair Isaac and Company calculated the original FICO score to assess creditworthines. You can find out more about FICO here.
Your credit score comes from your history of repayment. They never consider income, savings, down payment amount, or personal factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other personal factors.
Past delinquencies, derogatory payment behavior, current 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 the good and the bad in your credit report. Late payments count against you, but a record of paying on time will raise it.
For the agencies to calculate a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to assign 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.
Saltwater Funding, Inc. can answer your questions about credit reporting. Give us a call at 386-246-6322.