A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to discover two things about you: your ability to repay the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To calculate your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score comes from your history of repayment. They do not consider your income, savings, down payment amount, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's likelihood to repay a loan.

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

Your report must 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 history ensures that there is sufficient information in your report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

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