Before they decide on the terms of your loan (which they base on their risk), lenders must know two things about you: whether you can repay the loan, and if you will pay it back. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult your credit score.
The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.
Your credit score comes from your history of repayment. They never take into account income, savings, amount of down payment, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.
For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This history ensures that there is enough information in your credit to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.
Blue Door Mortgage can answer questions about credit reports and many others. Give us a call at (617) 527-BLUE(2583).