About Your Credit Score

Before lenders decide to lend you money, they want to know that you're willing and able to pay back that mortgage. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. We've written more about FICO here.

Credit scores only take into account the info contained in your credit reports. They don't consider income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding other irrelevant factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score is calculated from both the good and the bad in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your 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 enough information in your report to assign an accurate score. If you don't meet the minimum criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.

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