Most people have some type of credit history, but for those who have managed to stay out of the credit fray, that lack of history can be detrimental to attempts to get major financing -- or so it looks at first. The truth is that not having a credit history can be a big block, but it's not insurmountable if you take one of three options. Bear in mind that these options could take time. Yet they can still provide you with the path you need to a mortgage and home ownership.
When You Have Time
If you can spare at least six months before you start to look for a mortgage, you could go the traditional route and set up a real credit history. Gas credit cards, secured cards, and even a card with a tiny limit from a bank you've been with for years can all help you. Make small purchases each month and pay them off immediately; this is where having a card from your bank comes in handy because you can often pay in person whenever the bank is open, instead of relying on the mail or a several-days'-long wait for a phone payment to clear.
This is really the easiest option because if you have no credit history, your bank might consider you part of the prime audience for a secured card. Plus, once you do start applying for mortgages, you won't have to jump through the hoops needed by those who don't have a traditional credit history. It takes at least half a year for scores to form and stabilize, so this option is best if you have some time to spare.
When You Have a Trusted Bank or Credit Union but Less Time
If you can't wait at least half a year, but you have a really good, long record of being a customer at a bank or credit union, you could talk to them about getting a mortgage. The key to getting a large loan like a mortgage is being able to prove that you'll pay it off as expected and that you're a good risk. If your bank has known you for years, they may be a little more understanding. This method can be kind of risky, so use it only if you really do have a longstanding relationship with one bank or credit union (you can have accounts at other places too -- you just need to be sure the one you're asking is one that knows you well).
When You Just Want to Get Started Now
Possibly the most frustrating but best option if you don't want to establish traditional credit and don't have a long bank relationship is to establish a payment record. Gather records that show at least a year of things like on-time rent payments. Any sort of evidence you can gather that shows that you pay on time is what you need. There are programs that allow things like rent and utility payments to be reported on your credit report, but these too take time to get that score going.
Talk to a few lenders about how they'd handle a no-credit application and what they'd like to see. Meanwhile, start gathering paperwork and looking into things like secured cards. The more options you have, the easier life will be down the road. For more information, contact a business such as SWE Homes.
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