Before lenders decide to give you a loan, they have to know if you're willing and able to pay back that mortgage loan. To assess whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.
Fair Isaac and Company formulated the original FICO score to assess creditworthines. We've written a lot more about FICO here.
Credit scores only consider the info in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess willingness to pay while specifically excluding any other demographic factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score reflects the good and the bad of your credit history. Late payments count against your score, but a record of paying on time will improve it.
Your credit report should have at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is sufficient information in your credit to generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.
U.S.A. Lending, Inc. can answer questions about credit reports and many others. Give us a call: 305-967-7200.