Credit Scoring

Before deciding on what terms they will offer you a mortgage loan, lenders want to discover two things about you: whether you can repay the loan, and if you are willing to pay it back. To assess whether you can pay back the loan, they assess 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. We've written a lot more about FICO here.

Credit scores only consider the information contained in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih 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 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 payment history ensures that there is sufficient information in your credit to calculate an accurate score. If you don't meet the criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage.

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