About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must discover two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. For details on FICO, read more here.

Credit scores only take into account the information 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 invented as it is now. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's willingness to pay back a loan.

Your current debt level, past late payments, length of your credit history, and 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 consistently making future payments on time will improve your score.

Your credit report should 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 sufficient information in your report to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

Harbor View Lending* a DBA of Megastar Financial can answer questions about credit reports and many others. Give us a call: (207) 571-8034.