About Your Credit Score

Before they decide on the terms of your loan, lenders need to discover two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To understand your ability to repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more about FICO here.

Credit scores only assess the info contained in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is enough information in your report to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

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