In short, it is possible to qualify for a USDA home loan without a credit score but the lender is required to create and submit a non-traditional credit report that shows your payment history for certain accounts. If you can demonstrate that you have a track record of paying multiple bills on time, and therefore you are likely to pay your mortgage on time, you should be able to get approved for a USDA home loan despite not having a credit score.
Lenders develop a non-traditional credit report by verifying that you have a twelve month payment history for two or three of the accounts outlined below, which are also referred to as tradelines. If the lender can verify your rent or mortgage payment history over the past year, the lender is only required to use two of these accounts. If the lender does not use your rent or mortgage, three of the accounts below are required to establish your credit history.
Accounts You Can Use to Establish Payment History for a USDA Home Loan
Utilities (water, electricity, gas, cable, satellite, telephone)
Insurance (car, renters, homeowners, life and health insurance payments made directly)
Documented personal loans provided by a non-relative
Recurring payments to local stores
Other bills, loans or obligations that show a twelve month payment history
You have saved money on a regular, monthly basis to cover three months of total monthly housing expense -- which includes your mortgage payment, property tax, homeowners insurance, mortgage insurance and homeowners association (HOA) dues, if applicable
As noted above, you are required to show a twelve month payment history for any of the accounts above if you want to lender to include the account in your non-traditional credit profile. The lender can verify your payment history by using cancelled checks, third party verification services or account information from your credit report (please note that you may have a credit report even though you do not have a credit score).
You can only have one 30 day late mark on an account for the lender to include it in your application. Accounts with multiple late payments or delinquencies longer than 30 days are not permitted. Additionally, the account must be currently open or closed within the past six months to be eligible.
The final point to keep in mind is that your mortgage application requires manual underwriting instead of automated underwriting. In short, manual underwriting requires more documentation and effort by the lender as compared to the USDA's standard underwriting process.
Plus, the loan qualification requirements may be more challenging in other areas. For example, the lender may apply a lower debt-to-income ratio which reduces the mortgage you qualify for and also lowers your monthly payment.
Use ourUSDA HOME LOAN QUALIFICATION CALCULATORto determine the USDA mortgage you can afford
We should highlight that not all lenders are willing to do manual underwriting because of the additional work required so be sure to confirm with your lender upfront that they offer USDA home loans for applicants without a credit score. You do not want to waste your time working with a lender who is unable or unqualified to process your mortgage.
The table below shows leading lenders in your area. We recommend that you contact multiple lenders to confirm their USDA home loan eligibility guidelines.
"Chapter 10, Attachment 10-A, Non-Traditional Credit." Single Family Housing Guaranteed Loan Program Technical Handbook. U.S. Department of Agriculture, 2020. Web.
Review our comprehensive USDA Home Loan Guide including helpful information on qualification requirements, eligibility guidelines and program availability