A Score that Really Matters: The Credit Score

Before they decide on the terms of your loan (which they base on their risk), lenders want to discover two things about you: whether you can pay back the loan, and how committed you are to repay the loan. To understand your ability to repay, they assess your income and debt ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.

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

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score results from 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.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your report to assign an accurate score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

The Elite Lending Team at Milestone Mortgage Corporation can answer questions about credit reports and many others. Call us: 561-373-4149.


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