A Score that Really Matters: Your Credit Score
Before deciding on what terms they will offer you a loan, lenders want to know two things about you: whether you can pay back the loan, and how committed you are to repay the loan. To figure out your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
Fair Isaac and Company built the original FICO score to assess creditworthines. You can learn more about FICO here.
Credit scores only assess the info in your credit reports. They do not take into account income, savings, amount of down payment, or factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to consider solely what was relevant to a borrower's likelihood 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 scores. Your score reflects both the good and the bad of your credit history. 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 history ensures that there is enough information in your report to generate an accurate score. If you don't meet the criteria for getting a credit score, you may need to establish your credit history prior to applying for a mortgage.
Milestone Mortgage, Inc. NMLS#136714 can answer questions about credit reports and many others. Call us: 3175959600.