Credit Scoring

Before lenders decide to lend you money, they have to know that you are willing and able to repay that mortgage loan. To assess your ability to repay, they look at your income and debt ratio. In order to assess your willingness to pay back the loan, they consult your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more about FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your report should contain 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 enough information in your credit to assign a score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.

The Elite Lending Team at Milestone Mortgage Corporation
NMLS# 133260 can answer your questions about credit reporting. Call us at 5613734149.