About Your Credit Score
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Before lenders decide to give you a loan, they need to know if you're willing and able to pay back that loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company built the original FICO score to help lenders assess creditworthiness. For details on FICO, read more here.
Credit scores only take into account the info contained in your credit reports. They do not take into account your income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess willingness to repay the loan while specifically excluding any other personal factors.
Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score comes from the good and the bad of 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 history ensures that there is enough information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage loan.
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