Credit Scores

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

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

Your credit score comes from your history of repayment. They don't consider income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay without considering other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad in your credit history. Late payments count against your score, but a record of paying on time will improve it.

Your 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 payment history ensures that there is sufficient information in your report to calculate an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage.

At Harbor View Lending* a DBA of Megastar Financial, we answer questions about Credit reports every day. Call us: (207) 571-8034.