Is a borrower eligible for FHA insured financing if he or she does not have any credit history?

Lack of traditional credit or a Borrower’s decision to not use credit may not be used as the sole basis for rejecting the mortgage application. For Borrowers without a credit score, the lender must obtain a Non-Traditional Mortgage Credit Report (NTMCR) from a credit reporting company or independently develop the Borrower’s credit history. 
Non-Traditional Mortgage Credit Report
A NTMCR is used to access the credit history of a Borrower who does not have trade references that appear on traditional credit reports and is used as:
  • a substitute for a Tri-Merged Credit Report (TRMCR) or a Residential Mortgage Credit Report (RMCR); or
  • a supplement to a traditional credit report with an insufficient number of trade items.  
Mortgagees may use a NTMCR developed by a credit reporting agency that verifies the following information for all non-traditional credit references:
  • the existence of the credit providers;
  • that the credit was actually extended to the Borrower; and
  • the creditor has a published address or telephone number.
The NTMCR must not include subjective statements such as “satisfactory” or “acceptable,” must be formatted in a similar fashion to traditional references, and provide the:
  • creditor’s name;
  • date of opening;
  • high credit;
  • current status of the account;
  • 12-month history of the account;
  • required monthly payment;
  • unpaid balance; and
  • payment history in the delinquency categories (for example, 0x30 and 0x60) 

Independent Verification of Non-Traditional Credit Providers
To be sufficient to establish credit history, 3 credit references must be used, including at least 1 of the following:
  • rental housing payments (requires independent verification if Borrower is a renter);
  • telephone service; or 
  • utility company reference (if not included in rental housing payment), including gas, electricity, water, or television or Internet service.   
If the Mortgagee cannot obtain all three credit references from the list above, the Mortgagee may use the following sources of unreported recurring debt:
  • insurance premiums not payroll deducted (e.g., medical, auto, life, renter’s insurance); 
  • payment made to child care provider businesses that provide such services
  • school tuition; 
  • retail store credit cards (department, furniture, appliance stores);
  • rent-to-own (e.g., furniture, appliances); 
  • medical bill payments not covered by insurance; 
  • personal loan from an individual with repayment terms in writing and canceled checks to document payments; 
  • automobile lease; or
  • 12-month savings history evidenced by regular deposits resulting in an increased balance to the account that:
    • were made at least quarterly;       
    • were not payroll deducted, and;       
    • caused no insufficient funds (NSF) checks
  • 12-month history of payment by the Borrower on an account for which the Borrower is an authorized user.

Additional information is available in Handbook 4000.1 II.A.5.d.iii and II.A.5.a.ii(B)  at

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-04881