A Score that Really Matters: The Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must find out two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To understand whether you can repay, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company built the original FICO score to assess creditworthines. You can find out more about FICO here.

Your credit score comes from your repayment history. They don't consider your income, savings, amount of down payment, or factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is now. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to repay the lender.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against your score, 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 enough information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish a credit history before you apply for a mortgage.

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