Selling Guide

Published April 07, 2021

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When is it acceptable to use nontraditional credit?

Overview

If one or more borrowers do not have a credit score due to insufficient credit, the lender must establish an acceptable nontraditional credit profile. The lender must first check all three major credit repositories to verify the borrower’s credit history and confirm that the borrower does not have a credit score. 

If the borrower’s credit information is frozen at one of the credit repositories, and no credit score is available from any other repository, the lender may underwrite the borrower following the requirements for nontraditional credit. If the borrower’s credit information is frozen at two or more of the credit repositories, the loan is not eligible as nontraditional credit even though no credit score is available. 

The credit report will indicate if a credit score could not be produced due to insufficient credit. Lenders must ensure that the credit report accurately reflects the borrower’s information, such as the name, Social Security number, and current residence of the borrower to confirm that the lack of traditional credit was not erroneously reported because incorrect information was used to order the credit report. 

Note: For certain loan transactions, one or more borrower(s) are required to have traditional credit as evidenced by a credit score. See B3-5.4-01, Eligibility Requirements for Loans with Nontraditional Credit for additional information.

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