Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders want to find out two things about you: whether you can pay back the loan, and if you will pay it back. To understand your ability to pay back the loan, they assess 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 assess creditworthines. We've written a lot more about FICO here.
Credit scores only consider the info contained in your credit profile. They do not consider your income, savings, amount of down payment, or demographic factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on the good and the bad in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.
Your credit 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 history ensures that there is enough information in your report to calculate a score. Should you not meet the minimum criteria for getting a score, you might need to work on your credit history before you apply for a mortgage loan.
Coastal Mortgage Corp. can answer your questions about credit reporting. Call us at 504-866-5626.
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