Before lenders make the decision to lend you money, they want to know that you are willing and able to repay that mortgage loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to calculate your willingness to repay the loan, they consult your credit score.
Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written a lot more on FICO here.
Credit scores only consider the information contained in your credit reports. They do not consider income, savings, down payment amount, or factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.
Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from both positive and negative items in your credit report. Late payments count against your score, but a consistent record of paying on time will improve 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 enough information in your report to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.
American Commerce Mortgage can answer your questions about credit reporting. Give us a call: 714-970-9700.