Adjust Ban Book Bookmark Calendar Car Church Checked Circle Outlined Clock Close Coffee Equal Housing Opportunity Exclamation Facebook Female Flag Gift Globe Graduation Grid Hammer Hand Heart Habitat for Humanity Charlotte Habitat for Humanity Charlotte - Julia's Cafe & Books Habitat for Humanity Restore Charlotte Habitat for Humanity - Young Professionals House Instagram Leaf Line Chart LinkedIn Habitat for Humanity Restore Megaphone Menu Mobile Pencil Recycle Search Star Suitcase Tags Twitter Users Wrench YouTube Envelope
September 30, 2022

No credit history? Why you need to establish good credit if you want to buy a home. 

A house is the most expensive purchase we make. It is often a substantial amount of money that we borrow from a bank and then spend decades paying off. 

Your credit score is part of the information used by lenders to qualify for your loan and interest rate. If your credit score is low, it can impact your ability to qualify for a loan. Besides bad credit, a limited history of established credit can signal a low credit score. 

How Is Credit Score Determined?

When you apply for a mortgage, lenders want to know what risk they’d take by loaning you money. To evaluate this risk, lenders will often pull a credit report and credit score. The most widely used credit scores are FICO® Scores. FICO® Scores provide an unbiased and proven way to evaluate a consumer’s credit risk — helping consumers like you obtain credit more quickly and fairly.

Here is what determines your credit score: 

  1. Payment history: Whether you’ve paid past credit accounts on time
  2. Amounts owed: The total amount of credit and loans you are using and your credit limit
  3. Length of credit history: How long you’ve had credit
  4. New credit: How often you have credit inquires or new account openings
  5. Credit mix: The mix of your credit, retail accounts, installment loans, finance company accounts and mortgage loans

The three major credit bureaus are Equifax, Experian and TransUnion. They house the history of your credit data. When you get a new loan, make or miss payments on loans, or use a credit card, it’s common for your lender to report this information to the credit bureaus. The information stored at the credit bureaus is represented in your credit reports. Your credit reports contain information about your credit history including loans, credit cards, inquiries, payments and more. 

I pay my bills in cash and don’t use credit cards. How does this affect my credit score? 

This is an issue for many people who wish to purchase a home. Because they pay in cash for most services, they may not have established credit history or may have insufficient credit resulting in no credit score or a low credit score. 

If this sounds like your situation, you are not alone. An estimated 53 million people are “credit invisible.” Credit invisible means they don’t have a credit bureau file, or the file is insufficient for scoring. This is often the result of not having a history of using a credit card account or traditional loans.

As a result, families with invisible credit may be at high risk of predatory loans, and are virtually locked out of affordable homeownership opportunities. The lower your credit score, the higher the risk as determined by lenders. A high risk loan score can affect your monthly mortgage payment with higher interest rates. 

How can Houston Habitat help with credit scores?

Momentum is growing for initiatives that enable consumers to have their history of on-time rent payments or meeting other financial obligations included in credit scoring and lending evaluations. Rent payment reporting is emerging as a primary focus of these reforms. Research has found it to be a strong indicator of a renter’s future ability to make mortgage payments. 

Other promising alternative data sources for credit history include utility, cable and cell phone payments, as well as bank account statements demonstrating cash flow. By providing a more complete picture of your history of financial responsibility, it can reduce “credit invisibility” and broaden access to safe, affordable credit.

Houston Habit will work with you to verify credit through nontraditional credit documentation or reference letters from creditors who do not typically report to the credit bureaus. These “other” creditors may include rent, car insurance, utility bills, childcare, local businesses, and medical expenses. We help you determine your current credit score and look at your entire credit history rather than just the credit score. We work hard to not deny applicants to our program solely based on your credit score. 

Inclusive Credit Scoring, January 25, 2022, Houston Habitat International
FicoScore Education,


Take our Eligibility Quiz to learn how you can Become a Homeowner

More Stories