Tuesday, January 22, 2013

What Alternative Do You Have ? Alternative Credit and How to Make it Work for You...


More and more these days, borrowers are using creditors that do not report to the credit bureaus. Not that the borrowers are seeking them out on purpose. It may be more than a coincidence that when it's hard to obtain credit, those that offer credit don't really pay much attention to the credit bureaus. Something tells me the interest rate to borrow the funds from these creditors is probably a little bit higher than normal...

But that's another blog !

To get back to the blog at hand...This can be a disaster for some clients, because their bad credit scores from the past remain that way, bad scores. Since there has been no recent activity on their credit report, the bad scores become frozen in time.

That's when Alternative Credit Data comes into play. Lenders understand (yes, they ACTUALLY understand this, at least some of them do) that not everyone uses credit to live. A lot of people use alternative means - barter, money orders, checks (remember checks ?) and cash to actually pay to live. So there is a system set in place where a borrower can use alternative credit to get around normal credit requirements.

First and foremost, a borrower that will use alternative credit must know in advance they will do so, that way they can make sure their cell phone, electrical and gas bills are in their (the borrowers) name. The alternative credit account(s) must be in the borrowers name. Otherwise, alternative credit will not work.

There are different levels, or tiers, given to alternative tradelines:



Each tier has a descending level of importance, with the Tier I alternative tradelines carrying the most weight, and the the Tier III tradelines carrying the least. For instance, proof of 12 months Rental Housing payments are so strong, they often double as Verification of Rent and as one of the necessary three tradelines needed to meet the the alternative tradeline requirements.

There is one caveat to all of this is - with any source of alternative credit provided, you cannot be late. You are putting the last nail in your coffin if you provide documentation with a history of late payments. Take my advice - Don't do it.

This is a win-win situation for the future buyer.  You will get the benefit of the goods or services being provided to you from your alternative credit source, and have the ability to tap into this source when you are ready to take the plunge and buy a new home, without the hassle of maintaining the much heralded credit score rating...

6 comments:

  1. I learned a lot. I like your post for it gives a win win advice. Thanks for sharing.

    ReplyDelete
  2. Sure Justin - Thanks for responding. There are a lot of little "secret" things the public can do in order to help them better qualify for mortgage financing, but it's kept hidden for some reason. I am going to to try to give as much information as I can - and if it helps just ONE person, then it will be worth the effort...

    Thanks Again Justin !

    Rick

    ReplyDelete
  3. Thanks for educating us with your article.

    ReplyDelete
  4. Thank You NJ FHA. I hope to add more information in the future that helps to clear the air as far as mortgage financing goes - Thanks for Your Response !

    ReplyDelete
  5. The savings you got when you are renting will actually depends on the area you are living or staying. I think that will give you a quote on how much you can save, because as you can see the rent varies from state to state. And if you are saving that much from rent you might as well put it into investment, and to have the idea, you can check ouranyoptionreview.com anyoption broker review to help you out regarding investment and returns you need to have.

    ReplyDelete
  6. That's true, Ferra - rental savings does depend on the area you live in. In some places, it's a lot cheaper to own than it is to rent, and you get to claim mortgage interest on your taxes. You can't do that if your renting...

    Rick

    ReplyDelete