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Before they decide on the terms of your mortgage loan, lenders must find out two things about you: your ability to repay the loan, and if you will pay it back. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.
Fair Isaac and Company developed the first FICO score to assess creditworthiness. You can learn more about FICO here.
Your credit score is a result of your history of repayment. 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 willingness to pay without considering other irrelevant factors.
Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.
To get a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your credit to build an accurate score. If you don't meet the criteria for getting a score, you may need to establish your credit history before you apply for a mortgage.
Sierra View Financial Corp can answer your questions about credit reporting. Call us at 916-989-6222.