Before they decide on the terms of your mortgage loan, lenders need to find out two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company developed the original FICO score to assess creditworthines. You can learn more on FICO here.
Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other personal factors.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score comes from the good and the bad of your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.
Your 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 credit to build an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history prior to applying for a mortgage.
Peerless Residential Mortgage can answer your questions about credit reporting. Give us a call at (513) 713-1515.