Your Credit Score: What it means
Before lenders make the decision to lend you money, they want to know if you're willing and able to repay that loan. To assess your ability to repay, they assess your income and debt ratio. In order to assess 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. We've written a lot more on FICO here.
Credit scores only consider the info contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other irrelevant factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. 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.
For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to generate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage.
Milestone Mortgage, Inc. NMLS#136714 can answer your questions about credit reporting. Call us at 3175959600.