A Score that Really Matters: Your Credit Score

Before lenders make the decision to give you a loan, they want to know that you're willing and able to repay that mortgage. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the information in your credit profile. They do not take into account income, savings, amount of down payment, or demographic factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to consider solely what was relevant to a borrower's willingness to repay a loan.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scoring. Your score comes from both the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

Your credit report must 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 report to calculate a score. Some people don't have a long enough credit history to get a credit score. They may need to build up a 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. Give us a call at 5613734149.