Can I Qualify for a Mortgage with No Credit History?

Yes. FHA, VA, USDA, Fannie Mae, and Freddie Mac all let a lender approve a borrower who has no credit score by documenting other bills you pay, usually 12 months of on-time rent plus utility, phone, or insurance payments. The trade-offs are tighter limits: the home must be your primary residence, the debt-to-income caps are lower, and you need a lender willing to underwrite the file this way, since lenders can add requirements stricter than the program rules.

Do you have no credit history or a thin file?

Your lender starts by ordering a standard credit report. A FICO score needs at least one account open for six months or more and at least one account reported to a bureau in the past six months. If your report has no accounts, or too little activity to produce a score, the lender treats you as a borrower without a credit score and builds your credit history from other records.

A low score is a different case. If the bureaus return a score, FHA requires the lender to use your traditional credit, and Fannie Mae generally does not allow the nontraditional route for a borrower who has a score below its minimum. For manually underwritten, one-unit HomeReady loans, the lender may supplement your credit file with nontraditional references if the credit report's reason codes show that insufficient history caused the low score. This exception does not apply to derogatory credit, such as missed payments. If that describes you, getting a mortgage with a bad credit score covers your options.

Which payments can count as credit?

Each record needs a 12-month history. The programs accept similar lists:

• Rent paid to a landlord or property management company. For FHA, a reference from a management company showing when you paid can replace 12 months of canceled checks, unless you rent from a family member.
• Utilities you pay separately from rent: electricity, gas, water, TV, and internet.
• Phone, including cell phone service.
• Insurance you pay directly, not through payroll: auto, renters, health, or life.
• Other recurring bills: childcare paid to a business, school tuition, payments to a furniture or appliance store, the uninsured part of medical bills, a car lease, or a personal loan with written repayment terms.
• Savings: 12 months of regular deposits, made at least quarterly, that raised the account balance. For USDA, those savings must also equal three months of the proposed mortgage's principal, interest, taxes, and insurance and remain available after closing.

Proof can be canceled checks, bank statements that show the payee and amount, a written verification from the company, or a nontraditional mortgage credit report, which is a report a credit agency builds from these sources. Cash payments with no receipt or third-party record do not count. Fannie Mae also requires the lender to include every reference you have, including any with late payments.

What does each loan program require?

Reserves are assets left after closing, measured in months of principal, interest, taxes, and insurance on your new home. Fannie Mae also counts any association dues.

Debt-to-income ratio (DTI) is your monthly debt payments, including the new house payment, divided by your gross monthly income. The payment record rules are strict. For borrowers without a score, Fannie Mae permits no late housing payments and allows a 30-day late payment on only one other account in the past 12 months. Freddie Mac permits no housing payments 30 days or more late and only one 30-day late payment across all other payment references in the past 12 months. Both prohibit collections (other than medical) or judgments in the past 24 months.

When no borrower has a score on a manually underwritten purchase, Fannie Mae requires at least one borrower to complete a homeownership education course before closing. For a purchase reviewed by DU, that requirement applies when no borrower has a credit or installment account reported on their credit report; other education requirements may also apply. Freddie Mac has the same requirement when every borrower's credit is built only from noncredit payments such as rent and utilities.

Can rent paid from your bank account count automatically?

Both automated underwriting systems can read rent payments from bank data, with your permission:

• Fannie Mae DU: if at least one borrower has rented for 12 months at $300 a month or more and has no score, a limited credit history, or no mortgage on the credit report, the lender enters your rent and orders a 12-month asset verification report. DU can count the rent payments it finds. With that 12-month report, DU can also run a cash flow assessment of your deposits and spending, and an approval through that review can replace the nontraditional credit references.
• Freddie Mac LPA: LPA reviews 12 months of bank data for positive cash flow. Its separate rent payment feature applies to purchases where a borrower with a rent history has a usable score, is a first-time buyer, and has paid at least $300 a month for 12 months.

These features work only when the payments show up in your bank data. Pay rent by check or electronic transfer from an account in your name, not in cash or by money order, for the 12 months before you apply.

What if a co-borrower has a credit score?

Adding a borrower with a score changes the review. In Fannie Mae's DU, when at least one borrower has a credit account on the report, DU assesses the loan using that reported credit under its standard rules. Freddie Mac also uses the scored borrower's credit, but if the borrowers without a score provide 50% or more of the income, each of them still needs two 12-month payment references, and at least one of them must have a housing payment history. For an FHA loan, the lender uses the lowest score among the borrowers who have one.

How long does it take to build a credit score?

FICO's own guidance is about six months: an account that is opened, used, and reported to the bureaus should meet the scoring minimum in that time. Common ways to start:

1. Secured credit card: you put down a deposit that usually becomes the credit limit, and the card is usually reported to the bureaus like any other card.
2. Authorized user: a family member adds you to a card. FHA also accepts a 12-month history of payments you made on that account as a nontraditional reference.
3. Rent reporting: ask your landlord or property manager whether it reports rent to a credit bureau. FICO says this is not common.

Once a score exists, the lender must generally use it, even if it is low. If you already have 12 months of documented rent and two or three other bills, applying now with nontraditional credit may get you approved sooner than waiting for a score to mature.

How to apply without a credit score

1. Gather 12 months of proof: your lease and the landlord's or management company's contact information, bank statements showing rent, and statements for utilities, phone, and insurance.
2. Before any lender pulls your credit, ask whether it underwrites FHA or conventional loans with nontraditional credit, and what extra requirements it sets. Lenders for first-time buyers covers how to compare them.
3. Figure your DTI against the cap for your loan type: 43% for FHA, 36% for a manually underwritten Fannie Mae loan, 41% for USDA.
4. Budget for cash left after closing: a standard one- or two-unit FHA home requires at least one month of reserves in addition to your down payment and closing costs.
5. Pay every bill on time until closing, and do not open new accounts during the process.

Your lender will also need income and asset records; see the documents you need to apply. If you do have a score, minimum credit scores by loan type shows which programs it opens. For each step from application to closing, see the mortgage approval process.