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Nontraditional Credit in Florida for FHA, VA, and Conventional Mortgages

When it comes to buying a home in Florida, one of the key factors that lenders consider is your credit history. Traditional credit references, such as credit cards and loans, are commonly used to assess your creditworthiness. However, not everyone has a traditional credit history, and this is where Nontraditional credit comes into play.

Nontraditional credit refers to payment histories that may not be reported on a standard credit report but can still be used by lenders to assess your ability to repay a mortgage.

This article will break down the guidelines and documentation requirements for Nontraditional credit for Fannie Mae, Freddie Mac, FHA, VA, and USDA loans, providing essential information for Florida homebuyers who might fall under this category.

What is Nontraditional Credit?

Nontraditional credit refers to payment histories that are not commonly reported to the major credit bureaus like traditional credit references.

These traditional credit references include credit cards, loans, and other types of debt that are regularly reported and contribute to a borrower's credit score.

However, some individuals, particularly first-time homebuyers or those with limited credit history, may not have enough traditional credit to establish a credit score.

In such cases, lenders turn to Nontraditional credit to evaluate a borrower's creditworthiness.

Nontraditional credit includes various forms of payment histories that may not appear on a standard credit report but can still provide valuable insight into a borrower's ability to manage financial obligations.

Why Nontraditional Credit Matters

Nontraditional credit becomes relevant when borrowers have limited or no traditional credit history. For example, recent graduates, immigrants, or individuals who prefer to use cash for most transactions may have little to no traditional credit.

These individuals may still be financially responsible and capable of managing a mortgage, but their lack of traditional credit history makes it challenging for lenders to assess their creditworthiness through conventional means.

By considering Nontraditional credit references, lenders can gain a more comprehensive picture of a borrower's financial habits and responsibility.

This allows them to make informed decisions about the borrower's ability to handle mortgage payments and the associated risks.

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FHA Loan Nontraditional Credit Requirements

If you want to get an FHA loan but don't have a traditional credit history or credit score, there's still hope! FHA allows you to use nontraditional credit references to show that you can handle your financial responsibilities.

To establish your credit, you need three credit references, and at least one of them should be from the following options:

  • Rental Housing Payments - If you have been renting a home, the lender may verify your rental payments for the past 12 months, and you must have a clean record with no 30-day late payments.

  • Telephone Service - If you have a telephone service in your name, it can count as a credit reference.

  • Utility Company References - If you have been paying utility bills like gas, electricity, water, television, or internet service, these can also be considered as credit references.

If you can't meet the three credit reference requirement with the options above, don't worry! FHA allows you to use other sources of unreported recurring debt.

These sources include payments for insurance premiums, childcare services, school tuition, retail store credit cards, rent-to-own agreements, and payments for medical bills not covered by insurance.

Additionally, a documented 12-month history of savings with regular deposits and no insufficient funds checks, an automobile lease, a personal loan with proper documentation, or a 12-month history of being an authorized user on an account can be used as nontraditional credit references.

To verify your nontraditional credit references, the lender may independently check the existence of credit providers and that the credit was actually extended to you.

They may review public records and obtain canceled checks or other proof of payment from the last 12 months to verify your payment history.

If you've been renting, they may also get a rental reference from the rental management company to show your payment history.

With these nontraditional credit options, you can increase your chances of getting an FHA loan and achieve your dream of homeownership in Florida.

VA Loan Nontraditional Credit Requirements

The VA understands that not everyone has a credit score, and they don't have a minimum credit score requirement. Instead, they look at your past payment practices to determine your willingness to repay future obligations.

Your housing expense payment history, including the most recent 24-month rental history and any mortgages you had, will be verified and rated. This helps them understand how motivated you are to make timely mortgage payments in the future.

Even if you don't have a credit history, they can still consider your payment record on alternative or nontraditional credit directly from you or the creditor, where a payment history can be verified.

Having no credit history is not seen as a problem, and it's not considered an adverse factor.

In the VA loan process, the focus is on your overall payment patterns, not just isolated occurrences of unsatisfactory repayment. The lender will carefully analyze your credit report and other credit data to assess your creditworthiness.

While VA provides some guidelines for rent and mortgage payment history verification, they don't specify a strict set of guidelines for nontraditional credit assessment.

Instead, lenders may use their own guidance or follow guidelines from other agencies to evaluate your creditworthiness.

So, even if you don't have a traditional credit score, there are still ways for you to qualify for a VA loan based on your payment history and other credit data.

Fannie Mae Loan Nontraditional Credit Requirements

For Fannie Mae loans, the borrower's rental payment history for the most recent consecutive 12-month period must be documented. There should be no delinquencies on rental housing payments within the past 12 months.

If at least one borrower can document rental housing payments as a source of Nontraditional credit reference, it meets the rental payment history requirement for the loan.

Other Nontraditional credit borrowers on the loan are not required to provide rental payment history documentation.

When assessing the payment history for each Nontraditional credit reference, the following requirements must be met:

  • Only one account, excluding rental housing payments, can have a 30-day delinquency in the past 12 months.

  • No collections (except medical collections) or judgments have been filed in the past 24 months.

  • Judgments, liens, collections, and charge-offs of non-mortgage accounts must be satisfied in accordance with Fannie Mae guidelines.

Verification of Nontraditional credit can be done using bank account statements, wire remittance statements, canceled checks, money orders, or direct verification from landlords and creditors.

Freddie Mac Loan Nontraditional Credit Requirements

Freddie Mac, a major mortgage investor, recognizes that some homebuyers may have limited or no traditional credit history.

In such cases, Freddie Mac allows the consideration of nontraditional credit references to assess creditworthiness and help buyers qualify for a mortgage.

To establish nontraditional credit, at least one borrower whose income or assets are used for qualification must have a minimum number of payment references.

These references can be either at least three tradelines (like credit accounts) or at least four noncredit payment references (such as rental payments, utility bills, and insurance payments). Noncredit payment references must have existed for at least 12 months to be considered.

If all borrowers' credit reputation is established using only noncredit payment references, at least one borrower must participate in a homeownership education program.

Additionally, nonpermanent resident aliens can supplement their U.S. credit history with credit history from their home country to establish an acceptable credit reputation.

When evaluating a borrower's credit reputation, Freddie Mac weighs factors like the type and amount of credit outstanding, how long the borrower has had credit, payment history, and recent inquiries.

Payment history and how housing payments were made are essential factors in the evaluation.

Documentation of nontraditional credit can be obtained from credit reports or through direct verification from creditors.

If verification is provided by a non-professional source, the mortgage file must include additional documentation, such as canceled checks or receipts, to support the payment history.

USDA Loan Nontraditional Credit Requirements

If you don't have a regular credit history with a validated credit score or no credit score at all, you can still apply for a USDA loan.

USDA allows applicants to show their willingness to pay debts through other sources, called nontraditional credit.

Having nontraditional credit history is not a reason to deny a loan application. The approved lender will review your application and determine if it meets the Agency guidelines and if you are an acceptable credit risk.

For applicants with a 12-month Verification of Rent (VOR), you need to have two records of payments. One is the VOR, and the other can be either a record of payments for a year from a traditional credit source or another eligible nontraditional source.

If you have no rent history, you'll need three records of payments, which can be a combination of eligible traditional sources or eligible nontraditional sources.

An eligible nontraditional source should have a 12-month history and must not have been closed more than 6 months before applying for the loan.

Examples of acceptable nontraditional credit sources include rental or housing payments, utility services (like gas, electric, water, and landline telephone), insurance payments (except those paid through payroll deduction), childcare, school tuition, payments to local stores, and more.

However, child support, alimony, court-ordered debts, and monthly subscription services are not eligible for nontraditional credit sources.

You can document your nontraditional credit through a Nontraditional Mortgage Credit Report (NTMCR), self-reported records on a traditional credit report, or evidence from third-party verifications, canceled checks, receipts, electronic payments, or payment histories from the creditor/company.

Remember that if you use nontraditional credit to qualify for a guaranteed loan, you won't be eligible for debt ratio waivers.

Types of Non-Traditional Credit

Nontraditional credit includes a variety of payment histories and financial obligations that may not be traditionally reported to credit bureaus but can still provide valuable insights into a borrower's creditworthiness.

Lenders consider these alternative sources of credit when evaluating applicants who have limited or no traditional credit history.

Let's explore the types of nontraditional credit commonly used in mortgage assessments:

Rental Payments

One of the most significant forms of nontraditional credit is rental payment history.

Lenders consider a borrower's rental payment patterns over a specific period to assess their ability to make consistent and timely payments.

If a borrower has a history of on-time rental payments, it can serve as evidence of responsible financial management.

Utility Bills

Regular payments for utilities, such as gas, electricity, water, landline telephone service, or cable TV, can also be considered nontraditional credit references.

These recurring expenses provide lenders with insights into a borrower's ability to meet essential financial obligations.

Insurance Payments

Payments made for insurance coverage, such as automobile, life, renter's insurance, or medical supplements, can be included in nontraditional credit assessments.

Responsible and consistent insurance premium payments demonstrate financial responsibility.

Childcare Expenses

Licensed childcare providers' payments can be used as nontraditional credit when evaluating a borrower's creditworthiness.

These expenses reflect a borrower's commitment to meeting family and financial responsibilities.

Retail Store Credit Cards

In some cases, payment histories from retail store credit cards, such as department, furniture, appliance stores, or specialty stores, may be considered nontraditional credit references.

This can be especially helpful for borrowers who do not have traditional credit cards.

School Tuition

Payments for educational expenses, such as school tuition, can be included in nontraditional credit assessments.

This applies to borrowers who are students or parents responsible for educational costs.

Savings History

Regular deposits and a growing balance in a savings account over a 12-month period can be considered nontraditional credit.

This showcases a borrower's ability to save and manage financial resources responsibly.

Internet or Cell Phone Services

Payments for internet or cell phone services can be used as nontraditional credit references. Consistent payments in this category reflect financial stability.

Automobile Leases

Regular payments for automobile leases can be included in nontraditional credit assessments.

Personal Loans with Repayment Terms

If a borrower has a documented 12-month history of regular payments on a personal loan, it can serve as nontraditional credit.

Canceled checks, money order receipts, or electronic payment receipts can be used to support this information.

12-Month Documented History of Savings

Regular deposits to a savings account resulting in increased balances over the year can be considered nontraditional credit, provided the payments are made at least quarterly and without any insufficient funds (NSF) checks.


Understanding Nontraditional credit is essential for Florida homebuyers who may not have a traditional credit history or credit score.

Lenders consider rental payment history, utility bills, insurance payments, and other non-traditional references to assess creditworthiness.

Each loan program, such as Fannie Mae, Freddie Mac, FHA, VA, and USDA, has specific guidelines and documentation requirements for Nontraditional credit.

By knowing these requirements, Florida homebuyers can navigate the homebuying process with confidence and potentially qualify for a mortgage even without a traditional credit history.

You can consult with MakeFloridaYourHome to determine if you meet the Nontraditional credit guidelines for your specific loan application.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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