Credit Scores

Before lenders make the decision to lend you money, they must know that you are willing and able to repay that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

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

Credit scores only take into account the information in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was developed to assess willingness to repay the loan without considering any other demographic factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative information 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 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 generate an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply for a loan.

Milestone Mortgage, Inc. NMLS#136714 can answer your questions about credit reporting. Give us a call at 3175959600.

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Milestone Mortgage, Inc. NMLS#136714

38 W Main Street
Carmel, IN 46032