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Alternative forms of credit

Filed Under mortgage 

If you lack established forms of credit such as a mortgage, credit card, or car loan, there are forms of credit that can be used as an alternative.

Renting is an alternative form of credit. A verification of rent is obtained from the apartment complex, management company, or landlord. The verification of rent verifies your rental payment history.

Many “rural development” programs offered by our lenders allow for a variety of alternate credit proofs.

There are several loan programs designed for borrowers with little or no established traditional credit reflected on the credit report. Lenders must still have something in order to verify past payment histories and credit worthiness. Non traditional credit or alternative credit will provide the references that are needed to satisfy past payment history.

Other forms of credit that can be used in situations if borrower does not have more than 3 trade lines on their credit report include payments to the electric company and automotive insurance. Accounts must show excellent payment history and in good standing.

If you do not have good established trade lines and you are using alternate forms of credit your rate may be slightly higher. This would still be better than renting because you are putting yourself in the position to take advantage of the appreciation of real estate.

Your telephone payment history is another type of Alternative Credit. With your authorization, your mortgage professional can verify with your telephone company your payment history and use this verification as credit reference in the mortgage process.

Many lenders will allow you to use letters of credit from rent-to-own businesses to establish additional credit lines.

Is your rate too high? If you're looking to compare mortgage rates or to get a rate quote on a FHA loan start here


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