February 17, 2015
A reader asks, “My question is what would be a substitute form of credit?”
Since this question was asked in response to our blog post, “FHA Loan Credit Report Rules”, it’s probably safe to assume the reader is asking whether the FHA will permit the lender to consider alternative credit or non-traditional forms of credit in cases where the borrower has either no credit history, or a lack of traditional credit.
From our original post:
“HUD 4155.1 Chapter One has rules and instructions for the lender in these areas. Under “Required Credit Information” we find the following:
“A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in the credit repositories pertaining to
• credit
• residence history, and
• public records information.
Note: One report is required for each borrower. The lender may obtain a joint report for individuals with joint accounts.”
The FHA loan minimum requirements state that the lender is free to consider certain alternative credit which can include but isn’t limited to utility bills, rent payment history, and any other form of regular payment with which the lender can establish a potential borrower’s payment history and patterns of financial responsibility.
Naturally, lender standards and requirements may play an important role in such considerations, so the borrower will need to work with a participating FHA lender who is willing to consider such alternative forms of credit history. All such applications would be handled on a case-by-case basis.
Do you have questions about FHA home loans? Ask us in the comments section. All comments are held for review prior to being posted on the site.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: