Credit Scoring

Before deciding on what terms they will offer you a 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 figure out your ability to repay, they assess your debt-to-income ratio. To assess your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company developed the original FICO score to help lenders assess creditworthines. You can find out more about FICO here.

Credit scores only take into account the information contained in your credit reports. They don't consider your income, savings, amount of down payment, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to repay the lender.

Your current debt load, 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 count against your score, but a consistent record of paying on time will raise it.

Your credit report should 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 build a score. Should you not meet the criteria for getting a credit score, you may need to establish a credit history before you apply for a mortgage loan.

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