Buying a home usually requires that you prove to the lender that you can make your payments on time. This is done by reviewing your credit history. But what if you do not have any credit?
Verifying your rental history for the house or apartment that you have been renting can be an alternative type of credit. Usually, many lenders will require 12 months of cancelled checks to show proof that you have made your rental payments on time. Some lenders will allow a verification of rent form to be completed by your leasing company or your landlord instead of requiring the cancelled checks. It is always best to make sure you pay your rent with checks or money orders and save the cancelled checks or money order receipts instead of paying your rent in cash.
Other forms of credit can be from utility payments such as gas, electricity and home phone accounts. Cellular phone payment records can also be used as well.
Even if you have little or no established credit you do not necessarily need to provide proof of alternate credit. The FHA, and VA loan programs for example do not have any minimum credit requirements.
Credit reporting service providers often offer what is known as a Non-traditional credit report. A non-traditional credit report verifies information not normally found on a regular credit report such as rent payments, utility bills, and insurance payments. The reporting service will call all the creditors to verify payment history.
Almost anything that you pay monthly for at least one year, which can be verified through cancelled checks or a statement from a business, can be used as an alternate tradeline. By providing this information, you are showing your lender that you have a history of paying your bills on time.
Many lender banks also accept insurance payment pattern as alternative credit. Some banks require cancelled checks as proof of punctual payments, while others only require a letter from the insurer stating so.