Y’all are just so knowledgeable about finances and the mortgage market, that I told DD I would see if I could find some advice here for them.
DD and DIL have been married for 5 years, and DIL has been in the USA for those 5 years and is now a USA citizen. When she arrived, they added her to DD’s credit card so that she could gain credit in her own name. DD and DIL bought a small house almost 3 years ago using only DD’s credit info, since DIL was not working at the time. The house is in both of their names, and their bank account is a joint bank account. They file a joint income tax return. All of the utility bills are in DD’s name.
They decided to sell their house and possibly buy a new one, or rent. When they applied to a company that basically provides bridge loans, they got the news that DIL has NO FICO SCORE at all. No credit score. It turns out the bank only had added DIL to the credit card as an approved user, not a joint account holder. DD is not working now and is taking care of their baby, so the only income is DIL’s.
DIL applied online yesterday for a Costco card but was declined as she has no credit history.
Questions:
How will having applied for that Costco Card negatively impact her. (I seem to remember a question about “Have you ever been denied credit?” on mortgage applications.)
Are there any ways for them to get a mortgage seeing that DIL has no credit history and DD is not working? DD has excellent credit history, and they have money in the bank. When they sell the house they will have 20% to put down on new one.
I am not an expert on credit, but did have a similar experience when we moved to the US.
Is the mortgage on the current house not in both DD’s and DIL’s names?
DIL needs her own credit card or some other account to build her own credit. I think you know that though. Start with a credit card through her bank.
When we moved to the US from Canada 25 years ago, our credit history didn’t follow us. DH came first and had to get a new credit card to build credit. We had a hard time finding a place to rent 4-6 months later because of the lack of a credit score. After just over a year of renting though, we were able to qualify for a mortgage.
I’m also not an expert, but will offer my $0.02 anyway. I’d ask for the current credit card to be made a joint one, which the issuer should be glad to do since DIL does have income. I’d also look into a secured credit card, the type where a bank holds $X amount in a savings account and then issues a credit card with a limit equal to the funds on deposit. Use that card to pay for everything possible then pay off in full each month (or more frequently) to establish a good track record of payments.
It may be possible to get a FHA mortgage. It may also be possible to get a no credit check mortgage from a mortgage lender rather than a bank. No credit check mortgages, sometimes referred to as “liar loans”, seem to be back after they apparently disappeared following the real estate crash. These loans cost more (have higher interest rates) but it could be possible to refinance later once a good credit record has been established.
For the medium or longer term get a credit card that people with no credit can get, use it and pay it on time monthly (paying the full bill to avoid interest charges works) for a while to build up a good credit record.
For the immediate term, it may take some looking around to try to find a mortgage lender to lend to them when the income earner has no credit history. Or rent for a while first while the income earner builds up a credit history with the credit card.
I added my kids to my AmEx card when they were in high school. My AmEx credit history were added to their credit history. When both of them applied for their own credit card upon college graduation, they were able to get 20-30K credit limit on their visa/master card. If you D has an AmEx card she should add your DIL to the card. AmEx would generally ask you to provide additional card holder’s SS # and your DIL should provide it. Your D should add DIL’s name to their utility bills. Their bank can also provide a letter to let their lender know that DIL is a joint account holder, approximate amount of deposit and that she is in good standing.
Have your DIL get a secured credit card, through Capital One, or a similar company. Once you fill out the application, they will tell you what amount you need to deposit toward the card, usually $250.00 or less, and that will be the credit limit. Use the card and make payments on time. After a few months of using it, and making the payments on time, she’ll start to build her credit score. They may also raise her limit, which looks positive to mortgage companies. Just make certain she pays the bill on time every month!
The DIL may have been on the mortgage but not the loan. The mortgage won’t help with the credit score., only loans.
Credit scores go up with the more different types of credit you have and pay - a student loan, a car loan, a credit card, a house loan. My daughter got a car loan (and used my credit to get better rate), got a credit card with a low balance but that they kept raising about every other month and while her credit score fell at first (from about 700 to 630) it quickly went back to 700+. It takes about 6 months to build it up.
If they are legally married, they should be able to apply for a loan/mortgage jointly and get the same rates as if the one working also had the good credit score. They should explain all that to the bank before applying so that they don’t have multiple applications and multiple turn downs because every turn down does cause the credit score to go down a little.
I disagree with the getting secured cards or other temporary credit. Those won’t help the score long term and the rates aren’t good. Almost anyone with a good job can get a credit card like a visa or master card or discover. Find out why the Costco card (which I think is Citibank) was denied. Did she not fill in the income and obligations correctly?
Also, mortgage companies will usually accept 12 months of utility history, if DIL’s name is on the bills as a joint holder. You need to supply the bills and processed payments to the company. This can include water, electric, etc, or cell phones, cable, an the like. Have them contact the mortgage company they want to use and ask what would be required.
@twoinanddone Regarding Costco credit card - she did fill in the form correctly, but since she literally has NO FICO score at all (not a bad credit history, but zero credit history) she was not approved. Re: mortgage. They are legally married and house is in both of their names.
They are working with their credit union to get DIL her own credit card.
Thanks for the info, and keep the suggestions coming!
They could try contacting a lender found on one of Dave Ramsey’s sites. My ds and his wife had zero credit when they applied for their first home mortgage. They had been paying for everything strictly in cash (even paying for their cars in cash.) They had no problems getting approved (they used rent and utility history for approval with the mortgage company) and their rate was still low. (I had been concerned that they would end up with some unreasonable rate.) When they bought their second house, they still went with a company from one of Ramsey’s sites bc they were very happy their first time round.
They are legally married, so they have family income and if DD has a good credit score and credit history then should be able to qualify for a mortgage based on family income, even if that income is earned by legal spouse DIL.
As to the other issue, no credit history, my son, with no credit history, was able to get his first credit card - an American Express card affiliated with Schwab, because he has had a brokerage account at Schwab for a long time. He now has a high 700s credit score with only that one credit card.
Well this DIL didn’t have a SSN until a few years ago, right?
The house may be jointly owned, and both had to sign the mortgage/DOT, but only D may be on the loan and if so only her SSN is getting the credit history. There may be a way to fix that. I think it could have to do with when they bought the house, who was working, who qualified for the loan. And yes, maybe because they are women things weren’t fair. It’s always been a problem and it is still a problem. At the time of purchase, we don’t know what their credit and employment situation was and the loan office may have thought he was doing them a favor by pushing it through under just D’s credit and employment.
Just keep plugging away. Rates are so low now that mortgage officers are slammed, but keep on them.
Try having her apply for a Discover card. Normally wouldn’t be my card of choice, but this is the card that my son got as his first card while in college with minimal income (he had a PT job at Target stocking shelves over the summer.) Also, maybe have her apply for a store credit card - Amazon, Nordstrom, etc - not something affiliated with Visa/MC. Good luck!
If they are Costco members, it’s pretty easy to get a Citi Costco credit card. My D (who had no job and was a college student) was approved in store, on the spot when she was trying to be kind to the Costco guy who was drumming up applications. He was a bit miffed that her credit limit was higher than his!