Credit Tradelines Requirements To Qualify For Mortgage Loans

Gustan Cho Associates
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This Article Is About Credit Tradelines Requirements To Qualify For Mortgage Loans

Credit Tradelines Requirements On Government And Conventional Loans are set by individual lenders:

  • Credit tradelines are not agency guidelines
  • FHA, VA, USDA, Fannie Mae, Freddie Mac does not require a minimum number of credit tradelines by borrowers
  • Credit Tradeline Requirements are lender overlays set by individual lenders
  • Lender overlays are higher lending requirements that are above and beyond the minimum agency guidelines set by FHA, VA, USDA, Fannie Mae, Freddie Mac
  • Lenders can have higher lending guidelines above and beyond agency guidelines

Borrowers can qualify for government and/or conventional loans without credit tradelines as long as they can get an approve/eligible per automated underwriting system (AUS).

What Are Credit Tradelines?

Credit tradelines are credit accounts of consumers that report to credit bureaus. Lenders consider a credit tradeline as a credit account that is at least 12 months old that reports on credit bureaus.

  • For example, if a consumer has a Blue Sky Visa secured credit card, Blue Sky will be posting credit payment history on the credit report

Most creditors post to all three giant credit reporting agencies, which are:

  • Transunion
  • Experian
  • Equifax

The credit grantor will post the following:

  • credit limit
  • credit balance
  • minimum monthly payment
  • date of last activity
  • payment history

The more credit tradelines consumers have, the stronger and better their credit profile of the consumer:

  • One late payment on credit tradeline will hurt credit scores
  • The derogatory report will remain on the consumer credit report for 7 years
  • There are no credit tradelines requirements on the number of credit tradeline for borrowers to have to qualify for a mortgages
  • Many lenders will have overlays
  • Most lenders will require at least three to four credit tradelines requirements that have been seasoned for 12 to 24 months due to their lender overlays
  • This holds true even though the borrowers get an approve/eligible per automated underwriting system
  • Gustan Cho Associates has no lender overlays on government and/or conventional loans
  • GCA Mortgage Group just go off the automated findings of the automated underwriting system

In this article, we will cover and discuss credit tradeline guidelines and overlays by lenders.

Do Mortgage Lenders Require Minimum Credit Tradelines Requirements?

Do Mortgage Lenders Require Minimum Credit Tradelines Requirements?

Credit Tradelines are normally required by individual lenders as part of their own overlays.

  • Lenders with no overlays do not require credit tradelines
  • They just go off the findings of the Automated Underwriting System (AUS)
  • Mortgage Loan Applicants who have no tradelines but get an approve/eligible per Automated Underwriting System can qualify with a lender with no overlays

Gustan Cho Associates has no overlays on government and conventional loans.

Lender Overlays

Some lenders do have minimum credit tradeline requirements as part of their own overlays

  • Most lenders require a minimum of 3 credit tradelines requirements
  • There are lenders that will require 4 seasoned credit tradelines
  • Others have higher credit tradeline requirements

Some lenders may require a 12-month seasoning on credit tradelines while others may require 24 months.

Do Lenders Require Credit Tradelines Requirements?

Do Lenders Require Credit Tradelines Requirements?

Besides having minimum credit tradeline requirements, lenders may have credit tradeline seasoning requirements.

  • The majority of lenders require that mortgage applicants have at least one year’s worth of seasoning for each credit tradelines
  • For example, if a borrower recently got a Visa credit card and had it for six months, that would not count towards their credit tradeline requirement
  • They require that mortgage loan applicants have the credit for at least a year without any late payments. 

Lenders rate borrower’s risk level by reviewing credit tradeline for the past year.

Credit Tradeline That Has Been Seasoned For A Year

For mortgage Loan Applicants who do not have 3 credit tradelines that have been seasoned for a year, there is still hope.

  • Few lenders will make exceptions if other aspects of the borrower’s credit profile are strong with compensating factors
  • Compensating factors are positive factors

Examples of compensating factors are low payment shock, reserves, a second job that is not used for income.

Non-Traditional Credit Tradeline

what is the Non-Traditional Credit Tradeline

To substitute credit tradeline, we can use rental verification or non-traditional credit tradeline. Examples of non-traditional tradelines are the following:

  • Cellular phone bill
  • Cable
  • Internet Bill
  • Utility payment
  • Other documented monthly payment bills that have been paid with a check and/or direct deposit for the past 12 months with no late payments

Whenever rental payments are made or other monthly payments, please pay them by check so it can always be tracked and verified. Cash payment is non-existent in the mortgage world. Mortgage lenders will always want to see canceled checks as proof of payment.

Borrowers who need to qualify for a mortgage with a lender with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 1-262-716-8151. Or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Related> Credit Tradeline

Related> Non-Traditional Credit Tradelines

4 Comments
  1. Laura Brooks says

    Cool blog! Is your theme custom made or did you download it from somewhere?

  2. Madra Rucobo says

    So I’ve been working on my credit I have 2 secured cc’s one non secured they are all under a year so I wouldn’t qualify for a mortgage even with a FICO score of 620 because my tradelines are under 12mnths. I was never told that just to get my score up. Iam so disappointed I wanted to be in a home by the end of the year that ain’t happening now. I wish someone would’ve told me.

    1. Gustan Cho, NMLS 873293 says

      Who told you that you need to wait 12 months having new credit cards to qualify for a mortgage. That is absolutely not true. There is no such rule. That rule is probably the lender’s own rule and part of their lender overlays. You definitely qualify. Please reach out to us at gcho@gustancho.com or call/text us at 262-716-8151 or text us for a faster response. Looking forward to working with you. By the way, what state are you in?

  3. Norma Peterson

    Hello, finally here in 2021!

    2020 and COVID, what have you learned and what will make a difference for you now in 2021?

    It sure feels good to now be in 2021. 2020 was indeed very challenging for many, both personally and professionally. In the mortgage industry, we had the good fortune to have an incredible year. A big story for 2020 was obviously the pandemic. COVID19 is still here but the vaccine is starting to be rolled out and we are optimistically looking forward to moving ever closer to normal society. If you are doing the right thing, you should be looking at what lessons and best practices have been learned in this current and recent past 2020 experience. Last year we did a live webinar on this very topic. Proactively talking about running a mortgage business in a post COVID world. Seeing that we are hopefully headed to that point now, we wanted to bring this webinar back and make it available for you. This was a round table panel discussion with some of our industry’s leaders such as Mike Richardson, Tammy Trainor, Alex Carlucci, Michael Gracz, Piotr Bieda, Jammi Cash, Fiona McCue, Dale Elenteny, Michelle McCue, Gustan Cho, Ami Thakkar.

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