If you’ve never used a credit card or borrowed a loan with a co-signer, you will likely not have a credit score. This can cause problems if you are looking to buy a home on a mortgage. The thing is, lenders, assess your credit to gauge how much risk they will be taking on by giving you a loan. If you don’t have a credit score, lenders cannot assess how creditworthy you are. Does this mean you can’t get a mortgage loan when you don’t have credit? Read on to find out.
Will Lenders Consider Your Application if You Don’t Have a Credit Score?
A person’s credit score is the numeric representation of the data in their credit reports. Various factors affect your credit score, and your payment history is one of them. If you don’t have a credit score, you may be able to convince the bank to consider your payment history instead of your credit history.
However, you will need to offer alternative credit data such as your payment receipts and canceled checks to prove your payment history to the lender. Receipts that you can submit include your rent receipts, utility bills, cell phone bills, etc.
Where to Apply for A No-Credit Home Loan?
Commercial lenders: You may be able to apply to a commercial bank or mortgage lender for a no-credit loan. A number of lenders have begun to develop alternative credit score models, and you may just qualify for a loan.
Credit unions or local banks: Credit unions and local banks cater to fewer customers and offer more personalized services. So, if you have a relationship with a local bank or credit union, they may be more willing to offer you a loan.
FHA loans: Loans backed by the Federal Home Loan Administration might also be a good option for those with no credit. FHA loan providers usually don’t reject applications based on a borrower’s credit history or lack of it.
Remember that you can always hold off on getting a home loan until you build enough credit. Getting a secured credit card and making payments on time for a few months may be all it takes to build a good credit score.
