Knoxville Loans For First-Time Buyers: What If You Have No Credit History?

Credit is important to buying your first Knoxville home.

But, what about it you don’t have established credit?

Credit can be a Catch-22. You need credit in order to qualify for a loan. But, if you misuse you credit score, it can be hard to qualify for a loan. Those buyers who don’t have established credit are caught in a tough place. They’ve been responsible so they don’t have bad credit, but they don’t have the established credit to qualify for a loan.

In this post, we’ll explore whether or not you’re able to buy a home with no credit history.

Why Do Credit Scores Matter?

For Knoxville first time buyers, a credit score is very important. A credit score is a quick way to show lenders how responsible you are with your finances. When it comes to applying for a loan to buy a house, a credit score is very important. It give a mortgage company an easy way to see if you’ve been responsible with your finances.

Generally speaking, each of these factors represent a portion of you overall credit score. Here is the breakdown of how each factor influences your credit score:

  • Payment History – 35%
  • Credit Usage – 30%
  • Length of Your Credit – 15%
  • Types of Credit Used – 10%
  • New Credit – 10%

It’s important to note, though, for some people some of these factors have a large influence than others. This is just a general outline of the weight each factor holds in calculating your credit score.

What If You Have No Credit Score?

Don’t worry, if you don’t have an established credit score that doesn’t mean that you won’t be able to buy your first Knoxville home. You can qualify for a loan by showing you have non-traditional credit. Generally, most loans require at least four alternative lines of credit in order to buy a home. But, this does vary based on the loan type.

Here are some typical bills that can qualify as an alternative line of credit:

  • rent
  • insurance bills
  • utility bills
  • cell phone bill
  • school tuition
  • childcare

Just keep in mind, that buying a home with non-traditional credit will be more work than doing it with traditional credit. You’ll be required to show documentation that these accounts have been paid on time. So, be prepared to have to show your payment history for at least the past 12 months. You’ll need to show that these items have been in paid in the form of cleared check, written verification, or paid receipts.

Tips For Establishing Credit

Establishing credit is important even before you think about buying a home. It can take some time before a credit score is established. It takes time for your score to reflect your history of credit use and payments.

Here are a few tips for establishing credit:

  • Apply for a credit card or secured credit card. Use it to pay for something simple like gas or groceries every month. Be sure to only utilize a bit of the credit and pay it off every month.
  • Get added as an authorized user on a spouse’s or parent’s credit card. Another easy way to get a credit card is to be added as an authorized user to on someone’s credit card. Just be sure that the person who adds you has a good credit history.
  • Be sure to only use a small portion of your credit amount as part of your credit score is credit utilization.
  • Don’t apply for multiple credit cards in a short period of time – that can ding your credit.
  • Pay your bills on time. Missed payments can be reported to the credit bureaus.

Buying your first Knoxville home is an exciting and overwhelming experience. If you’re like most first-time buyers, you may not be sure where to start. If there is anything we can do to help you in your home search, please do not hesitate to contact us.

We’ve helped countless homeowners buy their first home and we’d love to do the same for you. Rick can be reached at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com. Kati can be reached at 865-696-1888 or via email at Kati@KnoxvilleHomeTeam.Com.