About Your Credit Score
Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to find out two things about you: whether you can repay the loan, and if you will pay it back. To figure out 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 formulated the first FICO score to assess creditworthines. You can learn more about FICO here.
Credit scores only consider the information in your credit reports. They never consider income, savings, amount of down payment, or factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to pay back a loan.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score considers positive and negative items in your credit report. Late payments count against your score, but a 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 sufficient information in your credit to build an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.
Churchill Mortgage Company can answer questions about credit reports and many others. Call us: (703) 551-4107.