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How to apply for credit with no credit

How to apply for a mortgage
How to apply for a mortgage © Goodluz/

Getting a home loan without a credit history takes more time, more manual underwriting and more paperwork.

"I can do loans like that," says John Stearns, a mortgage banker with American Fidelity Mortgage in Wisconsin. "FHA is the answer." He only needs three trade lines, such as cable, cellphone or utility bills that have a 12-month history.

The Federal Housing Administration, or FHA, insures mortgages against default through approved lenders and approves borrowers with riskier credit or smaller down payments. It provides nontraditional credit guidelines for consumers lacking credit history.

These lists show nontraditional credit items FHA considers for approving consumers with little to no credit.

Group I

Group II

  • Rental housing payments
  • Gas heating payments
  • Electricity payments
  • Water payments
  • Land-line telephone service
  • Cable TV
  • Auto leases
  • Personal loans
  • Insurance payments
  • Child care expenses
  • School tuition
  • Rent-to-own stores
  • Internet/cellphone service
  • Regular deposits into savings accounts

Group I accounts are considered more predictive of repayment than Group II payments, says Pava Leyrer, president of Heritage National Mortgage in Michigan. But several Group II items can make up for a shortfall of Group I accounts.

"It really depends on the strength of the terms," Leyrer says. "This is a loan that can be given, so consumers need to speak to someone experienced to put it together correctly."


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