Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to discover two things about you: your ability to repay the loan, and if you will pay it back. To assess your ability to pay back the loan, 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 built the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.
Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to consider only what was relevant to a borrower's willingness to repay the lender.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad of your credit history. Late payments will lower your credit score, but consistently making future payments on time will raise your score.
Your 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 history ensures that there is enough information in your credit to build a score. Should you not meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage loan.
At Channel Mortgage LLC, we answer questions about Credit reports every day. Give us a call at (718) 639-9500.