Some people do not have a credit history. They do not have a checking account or credit cards and have not borrowed money from banks. This makes it hard for a lender to tell if they can handle the responsibility of a home loan.

If you do not have a traditional credit history, owning a home is not out of your reach. Ask your loan officer or credit counselor to help you build one. This is called nontraditional credit history.

A counselor may ask you to do the following to build a nontraditional credit history:

• Keep copies of bills you pay, including your rent, telephone, electricity, cable television, gas and insurance.
• Keep copies of canceled checks or money order receipts used to pay your bills.
• Ask your landlord, the telephone company and the gas and electric company to write a letter to your lender about how long you have been a customer and how well you have paid your bills each month.
• Show bills, payments and letters to lenders to prove that you pay your bills every month. A two-year record should be sufficient for the lender.
• Consider asking your bank if they can issue you a secured credit card, backed by your savings account, to help you establish credit. Then use the credit card for some of your purchases, but be sure to make the credit card payments on time each month. You can also apply for a credit card on your own, from a department store or a credit card company.
• If you are married, make sure some accounts are in your name and your spouse’s name, so you will both build a credit history.
• Ask a nonprofit credit-counseling service or housing assistance agency to help you prepare a nontraditional credit history.

Information in this section was provided by Jon Clayton, Director of Educational Services at Memphis Consumer Credit Association.