Alternative Credit Sources for Mortgage Approval

Not having credit cards or loans does not necessarily mean you have bad credit. Sometimes it simply means the credit bureaus do not have enough information to generate a usable score.

Depending on the mortgage program and underwriting method, documented payments that do not normally appear on a credit report may help establish a nontraditional credit history.

Alternative—or nontraditional—credit uses recurring bills and financial obligations to demonstrate how consistently you make payments.

Possible credit references may include:

• Rent or housing payments
• Electric, gas or water bills
• Cellphone, internet or cable service
• Automobile or medical insurance premiums
• Other recurring obligations that can be independently verified

Not every account will qualify, and requirements vary by mortgage program.

Many programs require approximately 12 months of documented payment history. 

Acceptable documentation may include:

• Statements or payment histories from the provider
• Cancelled checks
• Bank statements showing consistent electronic payments
• Money-order receipts identifying the payee
• A direct verification completed by the creditor or landlord
• A nontraditional mortgage credit report

Cash payments can be difficult to document unless an independent third party can verify them. “I promise I paid it” is emotionally compelling, but underwriters remain stubbornly unimpressed.

Housing payments are often one of the strongest nontraditional credit references because they demonstrate your ability to manage a recurring monthly obligation.

If you rent, keep:

• A written lease
• Rent receipts
• Cancelled checks or bank records
• Contact information for your landlord or property manager

Whenever possible, avoid paying rent with undocumented cash.

Nontraditional credit may help borrowers with limited or no traditional credit, but it does not replace every mortgage requirement.

The lender must still evaluate:

• Income and employment
• Monthly debts
• Available funds
• Payment history
• Mortgage-program requirements
• The complete risk profile

The number and type of credit references required will depend on the loan program and underwriting findings.

Concorde Mortgage can review your credit profile and determine whether traditional credit, alternative credit or additional credit-building time offers the best path forward.

No score does not automatically mean no mortgage. It means we need to examine the complete picture.