Problems With Your Credit Score? No Credit Score??

April 1st, 2010

It seems all banks and all types of loans today require a credit score to get a mortgage. I know of only one bank that still allows what is called “an alternative credit history”, it seems 99% of all banks now mandate the need for a credit score. But there are a few people, very few, who don’t use credit, have not gotten a credit card, and pay cash or write checks for everything. I find these people to be younger, or much older. The younger people still have not considered building a credit history, and some much older people just never used credit or were never comfortable with it.

So one point of this blog is, if you have no credit, go get it! Get a few credit cards, maybe a store card as well, and buy a few things with them, and maintain usage and an on-time payment history.

Also, many people use a debit card, and using a debit card does not build any credit history since the amount spent is immediately taken from your bank account. People that use only debit cards need to consider using a few credit cards to build a credit history.

It seems that most banks want to see at least 3, and preferably 4 individual pieces of credit on your credit report, along with a credit score.

As shocking as it sounds that there are people that have no credit history, I have run into 3 potential home buyers this year alone, and it has been impossible to incredibly difficult for them to get a mortgage for a home.

FHA loans traditionally allowed for “alternative credit”, but now all banks that do FHA loans want a credit score (except for one that will still use alternative credit, but I imagine they’ll change that policy soon, and require a credit score).

Alternative credit history would be comprised of at least a 12 month credit history of things that normally do not show up on a credit report. These would be car insurance, rent, various utility bills, cell phone bills, renter’s insurance, etc.

We used to get the above types of creditors to write letters as to the borrower’s credit history and then take this “alternative credit” to the credit bureau and ask them to add it to the credit report. But, as I said before, this is mostly no longer an option.

So for anyone that has no credit, and no credit score, start building a credit history now! It not only comes in handy to have good credit with a high credit score for a mortgage application, but it is also good to have when being interviewed for a job, and purchasing insurance (both of which more frequently now check credit scores as part of a background check).

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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