Credit Invisibles Can Purchase
Trying to buy a home with bad credit is hard. But what about trying to buy a home with no credit at all? There’s a name for these people: “credit invisibles.” It means they don’t have credit or a score with the three major credit bureaus (Equifax, Experian, and TransUnion), usually because they don’t have a traditional credit trail such as a credit card or college loan. Far from being anomalies lurking on the fringes of society, credit invisibles are shockingly common.
According to a recent report by the Consumer Financial Protection Bureau, roughly 45 million Americans are characterized as credit invisible. Meanwhile, 19.4 million are known by another equally ominous label: “credit unscorable.” That means they have some credit history, but not enough to generate a score.
Typically, invisibles and unscorables face a tough road if they want to buy a home, because lenders are reluctant to approve individuals with no traditional track record of paying back debts. But hope has arrived for these credit-challenged folks: A growing number of lenders are using alternative scoring methods to assess a home buyer’s creditworthiness for a home loan—which means that many who have been shut out of home-buying might now have a shot. Alternative credit data can include rent payments, cell phone bills, insurance and more. The bottom line is that qualifying for a home loan when you have little or no credit history can be difficult, but it’s doable today. You just need to be willing to dig up the documentation to prove your excellent alternative credit history.