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Can You Qualify for a USDA Loan with No Credit Scores?

September 15th, 2015 by Sean Stephens

Qualifying for a USDA Loan with No Credit Scores

In the situation where there is truly no credit scores established, qualifying for a USDA loan can be possible but additional qualifying steps will be needed. Today’s blog will discuss what options are available when there is NO credit score.

Non-Traditional Credit References for USDA Loansno credit scores

In the case of no credit score reporting, USDA guidelines will permit verification of “non-traditional” credit to be considered in the underwriting evaluation. These would be accounts paid by the applicant, but normally would not report to the credit bureaus.

However, it is important to note that a buyer with “zero credit scores” must truly have a credit profile that is without any negative credit reporting, period.

Non-traditional credit CANNOT offset adverse credit.

In a no score situation, we will need at least 3 pieces of non-traditional credit provided there is a 12 month verified rental history. If no rental history can be verified, then 4 alternative lines of credit will need to be documented.

Possible examples of non-traditional credit types could be:

  • Rental History
  • Utilities
  • Car Insurance
  • Cell Phone, Cable, or Internet
  • Retail store accounts
  • Verification will be required to show an acceptable 12 month payment history:
  • Cancelled Checks
  • Non-Traditional Mortgage Credit Reports

Written account verifications directly from the creditor which would include:

  • Date the account was opened
  • Account Balance
  • Monthy payment due, and
  • Payment history reported in 0X30, 0X60, 0X90 format

Statements such as satisfactory or acceptable are not permitted.

In summary, a buyer with no credit scores can qualify for the USDA Loan. However, minimum credit conditions will apply, and each situation is reviewed on a case by case scenario.

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