Not all first-time homebuyers will have a robust credit history, and as strange as it sounds, things like your cable bill or P.O. Box can help you land a VA home loan. Using alternative tradelines may convince mortgage lenders that you're a safe bet.
Benchmarks can vary, but VA lenders are often looking for borrowers with credit scores of at least 660. Lenders may also have requirements related to “tradelines” on your credit report, which are basically just different types of credit accounts. Think credit cards, auto loans, student loans and more.
These accounts shape your credit score and give lenders a look at your willingness and ability to repay debt.
When you’re gearing up for VA loan prequalification and preapproval, lenders will ask for your permission to conduct a hard credit inquiry and pull your mortgage-focused credit scores. They’ll also check out the tradelines on your credit report.
Policies and guidelines can vary by lender, but they’ll often want to see a minimum number of “seasoned” open tradelines, meaning they’ve been active and in good standing for a certain period of time.
A Veterans United underwriter may require additional information if borrowers have fewer than three tradelines with a 12-month history.
To be sure, we look at every borrower’s credit report and loan file on a case-by-case basis. Every situation is different, and underwriters utilize their discretion based on a host of factors.
Would-be buyers with a less developed credit profile may need to showcase their financial dependability in other ways.
Without those three seasoned tradelines, we might require a Verification of Rent (VOR) and two non-traditional tradelines to support your credit score.
So what counts as a non-traditional tradeline?
Talk with your lender about what might work as a non-traditional credit account. Guidelines and policies can vary.
If you have a satisfactory payment history of at least 12 months, you may be able to count such things as:
Some alternative tradelines can be more beneficial than others.
Generally, the two most important factors are the size of the payment and how often it’s due. Lenders may put greater emphasis on accounts like rent, utilities and cellphones.
Again, it’s important to remember that guidelines can vary based on the lender, loan type and other factors. Some lenders may not allow for the use of alternative tradelines.
Talk with a Veterans United loan officer for more details.