Getting a mortgage with no credit history

First, make sure the file is really empty

Before treating you as a borrower without a score, Fannie Mae's Selling Guide requires the lender to check all three major credit bureaus. The lender must also confirm that the report was pulled with your correct name, Social Security number and current address, so that a typo is not mistaken for missing credit.

Do the same check yourself first. The CFPB explains that you can get free reports from each bureau through AnnualCreditReport.com. An old account in a name you no longer use, or a file split by a wrong address, can sometimes produce a score once it is corrected.

Two paths through Fannie Mae's rules

Through Desktop Underwriter. Fannie Mae's automated system handles two cases. If at least one borrower has at least one credit or installment account on the report, it assesses the loan with that reported credit under standard guidelines. If no borrower has any account, it applies extra conditions. The home must be a one- to four-unit principal residence that every borrower will live in, and the loan must be a purchase or a limited cash-out refinance. DU may also require reserves.

In either case, the Selling Guide says the lender may not need to verify nontraditional credit references when DU runs a cash-flow assessment. That review looks at your bank account history through a third-party asset verification report. If the loan does not get an approval at first, a 12-month asset verification report may improve the result.

Manual underwriting. If a borrower has no score and the lender underwrites by hand, the limits are tighter. The home must be a one-unit principal residence, the transaction a purchase or limited cash-out refinance, and the loan within the baseline conforming limit. Debt-to-income is capped at 36 percent. If at least one borrower can document a housing payment history as one of the references, no minimum reserves are required. Otherwise the borrower needs 12 months of reserves.

FHA, VA and USDA loans have their own approaches to borrowers without scores. Ask a lender that offers them.

What can stand in for credit accounts

Nontraditional credit means regular obligations you have paid over time that do not show on a credit report. Rent is the strongest, because it is the closest thing to a mortgage payment. Utilities, insurance premiums, phone service, childcare and other recurring bills can also count. The lender documents each one and looks for a steady pattern without late payments.

Proof is what makes these records useful. A landlord's verification, canceled checks or bank statements showing each payment, and statements from the company in your name all help. Cash payments with no paper trail are hard to use.

Apply now or build a score first

The no-score path exists, but its limits are real. Fannie Mae does not allow the nontraditional route if the lender can get a score for you, or if you have enough credit to be scored and the score is below the minimum. In other words, it is for people with no score, not low scores.

If you can wait, a few months of a secured card or a small credit-builder loan, used lightly and paid in full, can create a score. That opens more lenders and loan options. If you need to buy now, find lenders that say plainly they work with borrowers without scores, and ask which path they would use. Fannie Mae also requires homeownership education in some cases, so ask whether that applies to you.

The bottom line

Check your reports first so that a reporting error is not mistaken for missing credit. Then gather a year of clean, documented payments and bank statements. With those in hand, a lender can show you which path fits and what limits come with it.