Credit Scoring

Before lenders make the decision to give you a loan, they have to know that you are willing and able to pay back that mortgage. To assess whether you can repay, they look at your income and debt ratio. To calculate your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. For details on FICO, read more 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. "Profiling" was as bad a word when these scores were invented as it is today. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's willingness to repay a loan.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is calculated wtih both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your credit report must 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 enough information in your report to build an accurate score. If you don't meet the criteria for getting a score, you may need to work on your credit history prior to applying for a mortgage.

Milestone Mortgage, Inc. NMLS#136714 can answer your questions about credit reporting. Call us at 3175959600.