Before lenders make the decision to give you a loan, they need to know that you are willing and able to repay that mortgage loan. To assess your ability to repay, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.
Credit scores only consider the information in your credit profile. They do not consider your income, savings, amount of down payment, or personal factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to pay back the lender.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad in your credit history. Late payments count against your score, but a record of paying on time will raise it.
Your credit 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 payment history ensures that there is sufficient information in your report to build a score. Should you not meet the criteria for getting a score, you may need to establish your credit history before you apply for a mortgage.
At Harbor View Lending* a DBA of Megastar Financial, we answer questions about Credit reports every day. Call us at (207) 571-8034.