Your Credit Score: What it means
Before lenders make the decision to give you a loan, they have to know if you are willing and able to pay back that loan. To understand your ability to pay back the loan, 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 first FICO score to assess creditworthines. You can learn more about FICO here.
Credit scores only consider the info contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is now. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to pay back a loan.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from the good and the bad in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your report must 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 enough information in your report to build an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage loan.
Homewithloan.com can answer your questions about credit reporting. Call us: 9727982110.