Credit Scoring

Before lenders decide to lend you money, they have to know if you're willing and able to pay back that mortgage loan. To figure out your ability to repay, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company developed the original FICO score to help lenders assess creditworthiness. We've written a lot more on FICO here.

Credit scores only take into account the info in your credit reports. They don't take into account your income, savings, amount of down payment, or factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other personal factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

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 credit to generate an accurate score. If you don't meet the minimum criteria for getting a score, you may need to work on your credit history before you apply for a mortgage loan.

Milestone Mortgage Corporation can answer questions about credit reports and many others. Give us a call: 561-207-8082.