VA LOAN CAPTAIN BLOG & Learning Center

Taking the Alternative

By: Grant Moon 01/15/15 12:34 pm

One of the requirements lenders must follow according to VA home loan guidelines is establishing whether or not the potential borrower has demonstrated a responsible credit history. Note here the VA doesn’t require a specific credit score in order to obtain a loan approval, only the lender needs to document timely payments. VA lenders do mind you and most ask for at least a 620 credit score. But there are times when a credit score isn’t available or for some reason the credit score is kept low due to a bankruptcy showing on the credit report some time ago.

When a credit score can’t be used or otherwise doesn’t exist, some lenders will accept “alternative” credit. Alternative credit is the timely payment of monthly obligations to third parties over a one or two year period. These payments won’t show up on a credit report because they’re not made to a credit card company or an installment loan. Instead, the payments are made to a utility company, a mobile phone bill or cable company.

Instead of using a credit score if a lender can establish there were no payments to at least three accounts more than 30 days past the due date, a responsible credit history can be validated. In addition to timely rent, three alternative sources can be used to satisfy the VA’s credit requirement. It’s important to note that not all VA lenders accept alternative credit and even some who do also require at least one active trade line appearing on a credit report. There are no VA guidelines that establish what alternative credit must look like but lenders who do accept alternative credit follow these ground rules.

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