In this poor economy, many people who once dreamed of owning their own home have since given up on that dream. Why? It is mainly because of credit. Lenders have tightened the requirements for granting home loans and many of the people who were once able to qualify no longer meet the requirements. There are several reasons for this. Someone could just be starting out and not have had the chance to develop a credit history or they may be in debt to losing a job. Other people simply refuse to use any type of credit if they can avoid it and by the time they want to buy a house they find that they cannot meet the credit requirements.
Many things require good credit if you want to not only be approved for the financing but also get a low interest rate. Low rates are important so that you do not pay extra money in interest that you could have avoided paying. If you have bad credit or no credit, it can be hard proving to a lender that you are someone who pays on time and that you are serious about purchasing a home. Even if you have a steady job, lenders will be unwilling to loan you the money that you will need for a purchase as large as a home.
Some people advocate that those who are ready to buy a home but have no credit history begin to establish a history. While this may seem like a good solution, it is not for everyone. A lot of people wish to avoid the credit problem altogether and they buy what they want using cash or do not buy it at all. For very large purchases they need to have financing but may still be reluctant to use credit. Others are afraid of identity theft and will actually avoid using credit in an effort to control where their Social Security numbers are. This can cut the risk of identity theft but it limits them to trying to get financing without having any kind of credit to fall back on.
Thanks to the rough economy and many people refusing to leave credit, some lenders are willing to use alternative credit. You may not realize that you are always establishing credit. Around 35% of your credit history is based on whether you make payments on time. With this in mind, some lenders are willing to look at your rent history and how you pay bills such as your water or power bill. They will check how often you pay, whether you have been behind, and whether you have ever had services disconnected. Through this the lender will be able to establish a credit history for you and provide financing.















