USDA Loan Advice - Credit Issues

[westcon5]

Hello.

I am looking to purchase a house here before the end of the year. Honestly, right now, I think that I started way too late to get the ball rolling.

My current situation is that I sent an inquiry to a mortgage company to see where I stand. I am single and my income level is right below the limit, so I am okay there. When I pulled my credit report in the last week, I found one collection from 2005 for $27! I started the HIPAA process on advice from the other forum on here. I can't see why I can't get that taken care of and removed. Of course I can pay it off, but I would want it gone off there.

I have no debts, and this might be my biggest problem. I had a credit card in college and foolishly cancelled it. There are no problems with it and it does not show on the reports anywhere. With that being said, I have no trade lines showing on any reports and a score can not be generated. I have plenty of accounts such as cell phone, power, cable, insurance and rent.

Has anyone gone through the process of obtaining a loan by verifying the rent and other accounts? What I am being told right now is that all lenders are requiring a 620 minimum score.

Is there any way to boost this to that point in the next couple of months? I know I am dreaming right now, but someone must have been in the same position and can post some suggestions.

Thanks for any replies!

[Anonymous]

Actually, USDA may be able to use those alternate forms of credit, so I would talk to a lender who does a lot of USDA loans and see what they say.

To get a credit score, I would probably try to get a short term installment loan. Credit unions are good for those, but many don't report to all three bureaus and that is very important to you. 

Get a credit card and keep only a few dollars balance on it each month.

Do you have a family member who can add you as an authorized user on an existing CC account with a good payment history and low balance?

Even if you do those things right away it will take several months before you will have a credit score. I believe you need at least three tradelines to generate a score.

[Anonymous]

A FICO score of 0 is not considered derogatory in the USDA Direct program.  If you don't mind living in a rural town (available on their website), you should check their online calculators to see if you meet the income guidelines for the Direct 502 program for your family size and then call your local USDA office tomorrow for further details.  If you meet their requirements and the property meets their requirements, you could be in a home a lot sooner than you think.  This program is done the the USDA Field Office, not a traditional lender.

[westcon5]

Thanks for suggesting some good places to begin. That is where I was kind of headed right now. I am surprised to hear that USDA does not look at 0 FICO as derogatory, although it is far from ideal or acceptable. It is too bad people think no scores are necessarily bad. Like I said, zero debt and I own my truck outright. Oh well...I guess I will have to start playing the game to get the things I would like!

Actually, I am far from a city person. The reason I was leaning towards the USDA is because most of the places I am interested in are actually out in the country. Some are closer in to the nearest city, but are well outside the boundaries.

Thanks again for the suggestions. I will see about opening a trade line or two, but most likely will speak with a lender and see what they have to say. Maybe they can tell me do this that and another thing and we can get you a loan.