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B3-5.4-02, Number and Types of Nontraditional Credit References (02/01/2023)


This topic contains information on nontraditional credit references, including


Number of Nontraditional Credit References Required

The number of nontraditional credit references that must be documented for a borrower without a credit score differs depending on the underwriting method and loan product, as described in the table below.

  Number of Nontraditional Credit References Required
Underwriting Method Loans other than HomeReady Loans HomeReady Loans
Manually underwritten loans
  • Four credit references for each borrower without a credit score

  • Three credit references for each borrower without a credit score

  • If there is a borrower on the loan without a credit score who cannot document any nontraditional credit references (because the borrower has none), the transaction is still eligible, provided no more than 30% of the qualifying income for the loan comes from that borrower.

Loans underwritten through DU
  • If the borrower(s) with a credit score contributes

    • 50% or less of qualifying income, at least two credit references for each borrower without a credit score.

    • more than 50% of qualifying income, then no nontraditional credit history is required for the borrower(s) without a credit score.


Eligible Types of Nontraditional Credit References

The types of credit references that can be used to develop a nontraditional credit history are those that require the borrower to make periodic payments on a regular basis with intervals that are no longer than every three months.

The lender must conduct an informational interview with the borrower to identify all credit references over the most recent consecutive 12 months. If the lender is requesting a nontraditional mortgage credit report from a consumer reporting agency, the agency will conduct the borrower interview and obtain the list of available nontraditional credit references.

In all cases, the payment history for each credit reference must be documented for the most recent consecutive 12-month period. All credit references must be included, not just those that reflect acceptable performance.

The following nontraditional credit references may be used to develop a nontraditional credit history for the borrower:

  • Rental housing payments. This includes payments made to a landlord or management company. Also included are payments made on a privately-held mortgage loan that is not reported to the credit bureaus, contract for deed payments and other similar arrangements, provided the payments are related to the borrower’s housing.

    • Loans underwritten through DU where a nontraditional credit history is required must include rental housing payments as one reference of nontraditional credit.

    • Manually underwritten loans do not require that one reference of nontraditional credit be rental housing payments. However, if no borrower on the loan is able to document a rental payment history, a minimum of 12 months’ reserves must be documented.

  • Utilities, such as electricity, gas, water, telephone service, television, and internet service providers. If utilities are included in the rental housing payment, they cannot be considered a separate nontraditional credit reference. Utilities can be considered a credit reference only if the payment history can be separately documented.

  • Medical insurance coverage (excluding payroll deductions)

  • Automobile insurance payments

  • Cell phone payments

  • Life insurance policies (excluding payroll deductions)

  • Payments for household or renter’s insurance

  • Payments to local stores, such as department stores, furniture stores, appliance stores

  • Rental (or lease) payments for durable goods, such as automobiles

  • Payment of medical bills

  • Payment of school tuition

  • Payments for child care

  • A loan obtained from an individual, provided the repayment terms can be documented in a written agreement

  • Checking account, savings account, voluntary payments made to a payroll savings plan or contributions to a stock purchase plan, provided the records reflect an increasing balance as a result of periodic deposits over at least the most recent 12 months. Contributions must have been made no less than quarterly.

  • Wire remittance statements demonstrating a consistent amount of funds remitted over the most recent 12-month period.


Recent Related Announcements

The table below provides references recently issued Announcements that are related to this topic.

Announcement Issue Date
Announcement SEL-2023-01 February 01, 2023


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