About Your Credit Score

Before lenders make the decision to lend you money, they want to know if you're willing and able to repay that mortgage. To understand your ability to pay back the loan, they look at your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.

Credit scores only assess the information contained in your credit reports. They don't take into account income, savings, down payment amount, or demographic factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score results from positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise it.

Your report must 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 sufficient information in your report to calculate an accurate score. If you don't meet the criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.

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