No Credit = No Loan … or Not?

You hear all over the news and in advertisements how important your credit score is. I agree … your score is absolutely important and has become the first go-to thing lenders look at. We want to know what the score is, how long you’ve had credit and how well you pay your bills on time.

But what if you’re one of those people who don’t have a credit score? It happens, even to some people who have some credit established. Maybe the history isn’t enough for a FICO (Fair Isaac Corporation) score to be generated or there are just too few items on the report.

credit  cardI’m here to give you some hope. Not all loan programs require a credit score. The main criteria – you must meet the eligibility requirements of a Minnesota first time homebuyer program. In conjunction with this, we will use FHA financing which allows us to evaluate credit not necessarily reported to the credit agencies.

Really, what it all comes down to is what you have for debt obligations outside of a traditional credit report. It’s imperative that we review credit for the lending process. This means we’re looking for accounts that you pay on a monthly basis, ON TIME and over the last 12 months. Our goal is to analyze three accounts, but that’s not set in stone.

So, what do we look at? Are you renting? Are your payments on time? If it’s a management company or apartment complex you pay, we can verify directly with them your timeliness. If you pay a private party, such as a private landlord, or your parents, we want to see the last 12 months cleared checks, or auto withdrawal, from you to demonstrate you’ve paid on time. As a tip, if you’re living at home, it makes sense to pay something to your parents, EVERY month, for 12 months, always due the same time (say, the 1st of the month) and by check. This way, regardless of the amount, we can look at your history as a source of credit.

What about other sources? Here is a quick reference list of items that you may pay monthly that can be used to develope your credit history. This list isn’t all-inclusive, but a way to get you thinking about what you have out there and how it can help you get your first home! Remember, these items must be in your name.

Utilities, cell phone, car insurance, weight loss plans, lot rent for a mobile home, renters insurance, health club payments, child support/alimony paid separately from your work paycheck, Netflix, gaming sites, internet services, lay-away or monthly payments to a doctor

Not all lenders allow the evaluation of credit from these sources, so you’ll want to ask ahead of time. The main idea I want to get across is that having no credit doesn’t necessarily mean no loan. It’s best to find a lender you’re comfortable with and one that has the ability to walk alongside with you to make your dreams become reality! I am here to help if you so desire!