About Your Credit Score

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to find out two things about you: your ability to pay back the loan, and if you are willing to pay it back. To assess whether you can repay, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

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

Your credit score is a result of your history of repayment. They never take into account income, savings, amount of down payment, or factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated from the good and the bad of your credit history. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

Your credit report should have 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 history ensures that there is enough information in your report to build an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on your credit history before you apply for a mortgage loan.

Milestone Mortgage, Inc. NMLS#136714 can answer questions about credit reports and many others. Give us a call: 3175959600.