Can You Buy A Home Without A Credit Score?

How Your Credit Score Can Help You Buy a Home

A credit score is a three-digit score that reflects your ability to repay debt. You acquire a credit score when you first start taking on debt, usually through a credit card. Scores can range from 300 to 900, but your starting score will likely fall in the middle of the spectrum. Your credit score is mainly based on two types of credit: revolving credit and installment credit. Revolving credit operates on a periodic basis. You can take out small amounts of debt each month, so long as you pay it off. Most Canadians take on revolving debt through a credit card. Installment credit is usually a lump sum loan. Once you pay off this debt, you cannot use it again. Most Canadians take on installment debt through car payment loans or mortgages.

How to Buy a House Without a Credit Score

It is your primary residence

If you have managed to completely avoid taking on any loans or credit cards thus far, you may find that your credit score does not exist. Luckily, there are still a few ways you can buy a house without one:

Pay in Cash

Your credit score helps qualify you for a mortgage by proving your creditworthiness. You may not need to qualify for a loan at all, however, if you have the means to pay for your home in cash. Paying for a property upfront is an unlikely scenario for many, but it is the most surefire way to purchase a home without a credit score.

Increase Your Down Payment

When you purchase a home, you must pay for a portion of the property’s value upfront. This is called the down payment. The remaining value of the home is paid by your lender through a mortgage loan. The larger your down payment is, the smaller your mortgage loan will be. As such, most lenders will favor borrowers with high down payments. If you have no credit score, offering up a large down payment is a great way to improve your odds of approval.

Alternative Lenders

If you do not qualify for a mortgage loan at a bank, consider looking into private lenders. While few lenders maintain very strict qualification standards. Some loans do not require a credit score at all. Despite having looser approval guidelines, private lenders will often charge higher rates to account for the added risk you present.

Building Your Credit Score

Of course, the best way to improve your odds of approval is to begin building a credit score. The trick to building credit is to borrow small amounts and pay them back consistently. You may want to consider opening a credit card or taking out small installment loans. By proving you can make your credit card payments on time, you are proving to your lender that you will be able to repay your mortgage loan.

Unfortunately, building a credit score is easier said than done. You cannot establish your financial credibility overnight. Realistically, you want to begin building your score at least a year before you apply for a mortgage. Even if you open a new credit account, it will take at least 12 months for the effect of your payments to affect your score. Furthermore, applications for new lines of credit will always hurt your score.

Regardless of where you are in your credit journey, RajanSaggi Mortgage Consultant can help. Our expert team of brokers can provide you with a private consultation to determine the best choice for you. Based on your unique financial situation, we will connect you to the perfect mortgage through our network of 50+ lenders.

Contact RajanSaggi Mortgage Consultant to schedule your free consultation.

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