How To Get A USDA Loan If You Don’t Have Any Credit

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Can you get a Zero Down USDA Loan if you don’t have credit?

USDA-Loan-Credit-CardsNow that is another really good question.

People looking to buy a home with a USDA Loan who do not have traditional credit histories can still qualify.

Since credit history is such a large part of getting any type of loan approved, what we need to do in a case where someone does not have a credit history is to… build a credit history.

The USDA Loan does specifically state that a non traditional credit report cannot be used to enhance bad credit or a poor payment history.

But before we build a credit history it is important that you know this works only for a person who has absolutely no credit.  It will not work for someone who has old bad credit.  The credit history slate needs to be completely blank.

A good place to go to see what your credit looks like is annual credit report dot com.

Okay, so here is how we build a credit history…

We’ll need to find alternative types of credit history that are at least 12 months old.  Here is a list of references that we’ve had some really great results with..

-          Rent payments as long as they can be verified and documented.  Cancelled rent checks do the trick well.

-          Utility bill payments such as: gas, electric, water, sewer, telephone, cable tv, etc.

-          Insurance payments such as: medical, health, life, auto or renters insurance

-          School tuition is a great resource

-          Department stores

-          Anything that is a regular payment that can be documented for 12 continuous months

Apply for a USDA Loan Online Now: Loan Application

If you do can verify your current rent payments, you will only need to have 3 of these ALTERNATIVE credit histories.  If your rent history cannot be verified.. say you pay rent in cash or live with family rent free or pay rent with a cashier’s check, you would need to have 4 of these alternative credit histories.  Then you can use them to qualify for a USDA rural home loan.

Since a borrower without a credit history is a higher risk, you’ll also need to be able to verify that you have a payment cushion in the bank.  So you’ll need to show at least 2 months of payments in a bank account.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab above and ask for a quote.  If you want to go ahead and get your application in, you can fill out my Home Loan Application Online here.

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3 Responses to “How To Get A USDA Loan If You Don’t Have Any Credit”

  • J Hickson on March 26, 2011

    Hi Paul

    You were recommended by Steve Stephenson. We are retired and on Social Security, I also get a small pension from the Post Office. We bought our current home in October, 2008 on VA, zero down. We filed bankruptcy in 2010 and it was final on April 21, 2010. According to VA I have to wait 2 years. That will be May of 2012. We are going to sell and rent our current home and move to Sunsites, AZ. Will be leaving here around October 22nd, 2011.

    I have been interested for the past two years in property at Doe Ranch Road. I am trying to find a way to work with him on getting this property and put a small, 1000 square foot , double wide manufactured home on it. But, I don’t want my total package to exceed $100,000, land and home? My current interest rate is 6% so I won’t accept anything over that amount, but would accept less, of course!

    I told Steve that I have my LLC IRA investments tied up because of the economy and the investment company is working on cashing all members out with up to date earnings as soon as they can. I have been waiting for 3 years now!!!! Anyway, this investment would pay off the land, although, I am hoping to negoiate the price with Steve. I have to find out what the tax value and property assessment value are currently because prices have dropped 30-35% on real estate. These are facts. What’s funny, Seattle thought they were immuned but just this year the values have dropped 35% and are expected to drop even more over the next couple of years!!!!

    Anyway, I would be interested in learning more from you.


    J Hickson

  • pauldunn on April 22, 2011

    @ J Hickson – We do not lend on manufactured homes. Your best bet would be to contact the dealer for a loan package. Also, if you are set on getting a manufactured home, be prepared for an interest rate substantially higher than 6%.

  • Melissa L on October 27, 2011

    I am starting my application for direct usda home loan. It will be in my boyfriends name since he is the only one working until we move. I am getting so excited about this but I am scared to at the same time. He has no credit. We have rented our apartment over 12months now. Never been late on rent or utlilities. So we are sending that in with our application. My sister just put him on her credit card as an authorized user. So, what I am asking is, do you think we have a high chance of getting the loan? We live in Ohio, he has worked for over a year nad we have a one year old. Thank you, Melissa.

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