Before I get into this topic, let me start with a disclaimer. We’re not credit experts and we’re not into credit repair. We are mortgage lenders, so we can advise people only from the mortgage end of things.

No Credit

If you have no credit, that often means we don’t have anywhere to go. When there’s no credit score, there are many loan programs that you can’t qualify for at all. In that case you will want to look for ways to build your credit. I suggest some strategies for that in my post, “5 Ways to Improve Your Credit Score.”

Non-traditional Credit

If you have very little credit, there are a very few programs that will allow you to use what’s called “non-traditional credit.” This means that if there’s anyone to whom you have made repeated payments over time, we could verify that payment history with them and use that to supplement your credit. A good example is insurance, but it could also be your rent or your phone bill. I’ve even done it with a gym membership.

Derogatory (Bad) Credit

Oftentimes non-traditional credit is better than derogatory credit. However, that does depend on the degree of the derogatory credit: bankruptcies, foreclosures, and multiple late payments. They all have a different impact, not only on your credit score, but on the loan programs that we can look at.

Also, is it accurate? Is the lower credit score due to errors in the reports? If so, making sure your credit history is accurate with the credit reporting agencies can help fix your credit score.

Aside from inaccuracies, the biggest thing we want to know about credit issues is how long ago was it? Have you re-established better credit since then? Have you had any late payments since then?

Maybe you had one episode of bad credit because a life event took place. Maybe you had good credit up until a certain time that something major happened, but we can see that you’ve been paying your bills just fine since then. That situation can be treated differently than someone who has chronically never paid anything on time.

Credit and Your Interest Rate

As far as interest rates go, usually bad credit and no credit are similar. They both mean higher interest rates than that of a prime standard loan. The reason for that is because when lenders sell these loans in the secondary markets, there are not as many points for investors to use when they grade the value of that loan. And the value of the loan determines the price they can get for it.

Regardless of your credit situation, there are things you can do to improve it so that you can get into some kind of a loan program. If you have questions about this, call us at (205) 986–4220, get online or find us on social media. We’re glad to help.

— Ben Chenault,
Certified Mortgage Planner
NMLS# 130305
MortgageBanc / Fairway Nmls# 2289

Fairway Independent Mortgage Corporation is not a credit counseling agency and will not provide credit advice. Please consult a professional regarding your specific credit situation.

Copyright©2019 Fairway Independent Mortgage Corporation doing business as MortgageBanc. NMLS#2289.4750 S. Biltmore Lane, Madison, WI 53718, 1–866–912–4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Business Oversight under the California Finance Lenders Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License. Georgia Residential Mortgage Licensee #21158. Licensed Nevada Mortgage Lender.

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