By Robert Irwin
Question: Over the years I have made sure that I buy only what I can pay for. As a result, I have zero credit and a very low FICO score (633). I even paid for my last apartment with cash. Now, with a growing family, I would like to get a mortgage to pay for a bigger house. In addition, I do consulting work for non-U.S. companies and this income is reported on a 1099 form, which could be another problem. Are programs available for someone in my situation?
-- Ali, Washington D.C.
Ali: Your predicament isn't that you have bad credit -- it is that, as you say, you have no credit. As a result, credit-reporting agencies and Fair, Isaac & Co. (which compiles FICO scores, a widely accepted measure of creditworthiness) apparently have rated you down. (By the way, 633 isn't all that bad, though it is probably just below what you would need for a conforming loan.)
You need to convince a lender that you are a qualified borrower -- a good risk. There are two ways to do this. The first has to do with how you fill out your loan application. You need to stress the positive. For example, you live somewhere and you have utilities, which you presumably pay by check. This leaves a trail showing a credit history. Further, if asked, many utility companies will provide a letter stating how long you have paid and how timely your payments have been.
In addition, consider going to the bank where you have your checking and savings accounts and borrowing some money. (It doesn't have to be a large amount.) Take the money out, make regular payments for four months or so, then pay off the balance. Recheck your FICO score after doing this. You may be pleasantly surprised!
The other method for convincing a lender to take a chance on you is to document your income. Even though your income is reported on 1099 forms, you presumably pay income taxes. You may not be able to show pay stubs, but you should be able to show Schedule C or other income on your 1040. Two years' worth of tax forms is usually enough to establish a steady income stream, particularly if it is a field you have been in for a long time.
A good mortgage broker should be able to hook you up with a lender that is sympathetic to your situation and willing to stretch just a little to make a good loan.
