Non Traditional Credit

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Recently there was a comment on one of my blogs about Non Traditional Credit.  For those who are not familiar with the term, Non Traditional Credit it is a process of creating credit history for Borrowers who have insufficient credit scores, or no credit scores at all.

There are basically three reasons why a Borrower has insufficient credit scores, or no credit scores at all:

  • The Borrower has never bought anything on credit before.
  • The Borrower had all their credit accounts closed, usually because of a bankruptcy, and has not reestablished credit again.
  • The Borrower had credit but stopped using it, because they purchases everything with cash.  As a result they lose the credit scores that they once had.  If the Credit Bureaus no longer have active credit accounts to evaluate a Borrowers payment history, then they will not be able to provide the Borrower with credit scores.

If a Borrower does not have credit scores, then they cannot qualify for a Mortgage,    therefore, credit scores have to be generated/created through a method that is referred to as Non Traditional Credit.  Both Conventional Mortgage Programs and FHA have a process that the Borrower will need to follow.  For the purpose of this blog I am not going to go into the Non Traditional Credit process for Conventional and FHA Mortgages because they are both very similar.  So the process below basically applies to both.

In order for a Borrower to establish Non Traditional Credit, they will have to demonstrate a satisfactory credit history for a minimum of 12 months.  During those 12 month they cannot have:

  • Any rent delinquencies.
  • No more than one 30 day delinquency on credit accounts
  • No Collections (other than medical) or Judgments filled within the last 12 months.

In applying for Non Traditional Credit the Borrower must provide at least four credit reference, and a minimum of one reference must come from one of the follow:

  • 12 months Rental Housing history (will be verified with landlord)
  •  Utility Bills:
    • Gas
    • Electricity
    • Water
    • Land-Line Phone Service
    • Cable TV

NOTE: Lender will obtain verification from the Utility Company that payments have been made on time for the prior 12 months.

The remainder of the four credit references that the Borrower will need to provide can come from:

  • Insurance Company (not payroll deducted)
  • Child Care
  • School Tuition
  • Internet
  • Cell Phone
  • Car Lease
  • Personal Loan with formal payment terms.
  • 12 month history of saving deposits which result in an continuous increase in the balance (cannot be payroll deducted)

Mortgages that the Borrower uses Non Traditional Credit to qualify, are manually Underwritten, and the following will apply:

  • 31/43 Debt-To-Income Ratios
  • Two months Reserves
  • Compensating Factors cannot be considered

A Borrower who does not have sufficient credit or no credit scores, may be able to qualify for a Mortgage with a Co-Borrower who has established credit scores.  Both Conventional Mortgage Programs and FHA have a provision that allows for a Co-Borrower to be used.

NOTE:   Even though both Conventional Mortgage, and FHA have a provision that allows Non Traditional Credit, and the inclusion of Co-Borrowers.  The tightening of guidelines in recent years, has resulted in many Lenders and Investors not accepting Non Traditional Credit, with or without a Co-Borrower even though the guidelines allow it.  So if a Borrower needs to use Non Traditional Credit to qualify for a Mortgage they should contact local Lenders as soon as possible to see if they will consider the use of Non Traditional Credit.



 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or

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George Souto
NMLS# 65149

C (860) 573-1308
CALL 7 Days/Wk
Fax (860) 760-6891

Email Me
About Me
My Blog

I am a Mortgage Loan Officer who can assist you with all your mortgage & refinancing needs in
CT, RI, MA, NH, and a FL Licensed Lender

I can assist you with your Conventional,
FHA, CHFA, VA, USDA, & 203K loan programs.

I reside in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Haddam. E. Haddam, Higganum, Chester, Essex, Deep River.


Comments (48)

Joni Bailey
101 Main St. Realty - Huntsville, TX
Your Huntsville / Lake Livingston Area REALTOR®

I just talked to someone whose son has no "credit." He owns a home. It is paid for. He does have a cell phone and of course utilities. So... I will email him this post to share with his son.

Nov 27, 2012 11:31 AM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

George - I didn't realize that it was still possible to get non-traditional credit.

Nov 27, 2012 01:22 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude


This was useful information and I learned a few things. Good to know for those buyers who fit the requirements and want to buy.


Nov 27, 2012 03:05 PM
Nan Jester
Exit Real Estate Gallery Jacksonville Beach, FL - Jacksonville Beach, FL
Realtor, Exit Real Estate Gallery

Sounds like the criteria you listed should prove without doubt that someone is qualified. Just have to find a lender that will use their data.

Nov 27, 2012 09:30 PM
Mary Sheridan
Keller Willliams - 1033 Hamilton Place,Johnson City TN 37604 - Johnson City, TN
Creative Marketing, Buyer Agency 423-943-7655

A lot of people, especially young couples, in this area have taken the Dave Ramsey financial course and are aiming to be debt free.    This sounds great, until they want to buy a house.    It seems odd to penalize people for being careful and prudent enough to get along fine without  debt.   

Nov 27, 2012 09:36 PM
Valerie M. Blake
RLAH Real Estate - Washington, DC
Distinctive Marketing - Exceptional Service

The toughest ones I get are buyers who are foreign with long-term but still temporary visas or those with diplomatic immunity.  Those are really tough and often impossible in the case of those with immunity.  Banks don't like to loan money to people who have international protection if they return home and default on their loans.

Nov 27, 2012 09:51 PM
Shanna Hall
Real Estate Solutions - Kirkwood, MO
I love selling houses!!!St. Louis, MO 314-703-1311

I consider myself fortunate that 98% of my clients have great credit and have saved a nice down payment.

Nov 27, 2012 10:25 PM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team
Hi George, great post and excellent explanation of what we call "no credit".
Nov 28, 2012 12:31 AM
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

Nice summary of this issue, especially as a reminder that this option exists.

Nov 28, 2012 12:56 AM
Terry McCarley
Coastal Real Estate - Cape Coral FL - Cape Coral, FL

I was not familiar with non-traditional credit.  This is great information to have as I have ran into buyers with little to no credit.

Nov 28, 2012 02:16 AM
Suzi Sandore
RealtyONEGroup - San Diego, CA
North County San Diego Homes

Thank you for this valuable information. I hadn't heard of non-traditional credit before, or if I did I would have figured it was some kind of scam. It's good to know there may be a way to apply for a loan even without a credit score. 

Nov 28, 2012 03:01 AM
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

Good info & I know many people that have dumped their credit cards & really don't care.  I noticed that a few of the things mentioned cannot be auto deducted from a paycheck - that's interesting.  They want to actually see the borrower making the effort by paying on time I guess.

Nov 28, 2012 04:07 AM
Travis "the SOLD man" Parker; Broker/Owner
Travis Realty - Enterprise, AL
email: / cell: 334-494-7846

Good info. Dealing with many young military here, many have had to resort to a combination of traditional & non-traditional credit sources, many of which you mentioned.

Nov 28, 2012 05:20 AM
Paddy Deighan MBA JD PhD - Vail, CO
Paddy Deighan J.D. Ph.D

credit has become a crazy mystfies me that the three reporting agencies maintain that teh average credit socre is still 678...hard to imagine wiht all of the foreclosures and repossessions...I am fmailiar with the algorithms that each agency employes but it is still a mystery that average scores are 678

Nov 28, 2012 11:33 AM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

I recall several buyers who couldn't figure out why it was so difficult to get a home loan when they paid cash for everything and had no debt. We have a crazy system...

Nov 28, 2012 01:55 PM
Rob Renk
Center Street Lending - McKinney, TX
AE | Fast Fix/Flip Loans for Residential Investors

Excellent inforamtion on Non-Traditional Credit.  Lender used to be more open to this, but now rely on credit scores that did so well in predicting the down turn in credit availability.

Nov 28, 2012 07:46 PM
Diana Walton
Champion Real Estate Group - Katy, TX
Diana Walton

George, thank you for taking the time to share this information. I work with clients that will greatly benefit from this information. Thanks

Nov 28, 2012 11:08 PM
Karen Steed
Tallapoosa, Bremen, Waco, Buchanan, Temple, Carrollton - Tallapoosa, GA
Associate Broker Haralson Realty

I talked to a representative at Churchill Mortgage and they focus on non-traditional credit.   

Nov 30, 2012 02:13 PM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Interestingly enough.  I have a credit score to get a loan, but do not have active credit lines and might have trouble establishing non-traditional credit.  I am living a cash lifestyle right now.  I closed out my last line when I paid off my car in October.

Dec 04, 2012 04:32 AM
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA


My daughter is one of those people who has not have credit or a credit score.  She does not have a credit card because she pays cash for all her purchases.  I have suggested that she get a credit card and charge a few things on it and they pay the charges immediately.  She isn't planning on buying a home since she will inherit our home and income property.  She is fine renting an apartment.  She paid cash for her used car.  

Dec 04, 2012 06:23 AM