Before lenders decide to lend you money, they must know that you are willing and able to repay that loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. For details on FICO, read more here.
Credit scores only consider the information in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding other personal factors.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score results from both positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.
To get a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your credit to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building credit history before they apply for a loan.
Main Street Mortgage Company can answer your questions about credit reporting. Give us a call at (713) 528-1245.