Before deciding on what terms they will offer you a loan, lenders want to know two things about you: whether you can pay back the loan, and how committed you are to pay back the loan. To assess whether you can repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. You can find out 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 like these. "Profiling" was as bad a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score is based on 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 should 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 payment history ensures that there is sufficient information in your report to build a score. If you don't meet the criteria for getting a score, you may need to work on a credit history prior to applying for a mortgage loan.
Channel Mortgage LLC can answer questions about credit reports and many others. Give us a call at (718) 639-9500.