About Your Credit Score
Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must know two things about you: your ability to pay back the loan, and if you are willing to pay it back. To understand your ability to repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more about FICO here.
Credit scores only consider the information contained in your credit reports. They don't consider income, savings, amount of down payment, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to consider only that which was relevant to a borrower's willingness to pay back the lender.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score reflects the good and the bad in your credit history. Late payments will lower your credit score, but consistently making future payments on time will raise your score.
For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to build a score. Some people 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.
First Community Bank of Central Al. can answer questions about credit reports and many others. Give us a call: (334) 285-8850.