Being credit-free is great but it has its disadvantages. Without a history of credit, it will be difficult to apply for a loan from conventional lending companies. And without a history of credit, the lender has no credit report to review and check whether you're eligible for credit or not.
The good news is, you can still keep that clean credit history and be able to apply for a loan. The FHA allows you to apply for credit with non-conventional credit institutions. In the FHA loan qualifications, it indicates that applying for a loan is possible even if you don't have trade lines with the three major credit bureaus.
As a potential borrower, you are required by the FHA to submit three credit references from the two groups of non-conventional credit resources. The first group is composed of utility payments including electricity, gas; and rental payments. This group is given more weight and is a good indicator of your creditworthiness. The second group, on the other hand, is consists of payment to day care, bank statements showing increased savings over time and insurance payments.
The FHA will also look into your employment. You have to have a stable job in the past two years and show the agency that you can manage your payments. To begin your application, you have to submit the following requisite documents: proof of residence including all your addresses in the past two years; employment history; and income tax returns or W2 for the past two years. Also, if you are a former veteran, you have to include your discharge papers in the documents to be submitted to the FHA. These documents will indicate your financial position in the past two years. The FHA will assess and measure your creditworthiness based on these credit references.
In summary, the FHA can grant you a loan even if you don't have a credit history to support your creditworthiness. Having said that, you must pay your bills on time, prove that you have a stable employment and you are responsible enough to meet your financial obligations. So you see, you still have credit options even if you don't own a credit card or a car for that matter. Applying for credit with the FHA is easy but you have to take note that you have to take care of your financial reputation otherwise, you may lose this privilege altogether.
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