While the basic Rule-of-Thumb for acceptable credit history is a minimum of four trade lines documented on a credit report, there are alternative methods of building a credit picture that an underwriter can use to make a decision for a loan approval.

For potential home buyers with little or no credit history, keeping records for 12 months of paying bills on time is essential for mortgage loan approval. In fact, loan officers will appreciate receiving proof that you have paid a variety of accounts regularly and on time. Even if you do not have a credit history, or your credit report isn’t as good as it could be, this may enable you to get a mortgage.

The industry term for this is “thin credit.”

Some loan types, namely FHA and USDA, will accept alternative credit sources in order to establish proof of financial responsibility. As in many other things that FHA and USDA will do, not all lenders will accept alternative credit when underwriting.

Alternative credit is unreported to the bureaus, but will still be verified and can be instrumental in a home loan approval.

Those with thin credit don’t usually have bad credit, but have just not had an opportunity to build enough traditional credit, such as bank/store credit cards, auto loans, etc. However, those with only negative credit, i.e., collections, judgements and liens, cannot overcome those be establishing alternative credit.

Alternative Sources for Building Credit:

• Rental History – Canceled checks and letter from property management company
• Medical Bills – 12 months of statements from medical billing company showing paid as agreed
• Utilities – power, gas, water, cable, cell phone
• Auto Insurance
• Health / Life Insurance – as long as it’s not auto-deducted from pay check

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Related Credit / Identity Articles:

• Understanding Credit
• Top Credit Do’s and Don’ts To Bear In Mind When Getting A Mortgage Approval
• Is There A Rule-Of-Thumb Regarding The Number Of Credit Lines To Have Open?
• Ten Things You Can Do To Protect Your Identity

Contact me

Navigating the mortgage approval process can be daunting. You need someone on your side. I am available right now to help you with the loan process and know the ins and outs of FHA, VA, USDA and conventional financing. If you want to buy a home using an FHA loan or refinance using VA, I am here to help. Contact me at Alpine Mortgage Planning, 1200 Executive Pkwy., Ste. 100, Eugene OR 97401, 541-342-7576/541-221-3455 cell or by e-mail. Only you can make the choice it is time to get the process started.