Credit Scores

Before they decide on the terms of your mortgage loan, lenders want to discover two things about you: your ability to repay the loan, and how committed you are to pay back the loan. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only assess the information in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other demographic factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scores. Your score is calculated wtih both positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will raise it.

Your credit 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 sufficient information in your credit to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply.

At Milestone Mortgage, Inc. NMLS#136714, we answer questions about Credit reports every day. Give us a call at 3175959600.