Closing only card means no score, no mortgage
Dear Opening Credits,
My husband and I were living in a cash world. Fourteen months ago, we canceled his credit card of two-plus years. Fast forward, we were going for a mortgage. We were informed he has no credit score. The lender said to get a new card, charge on it and pay the bill. How long will it take to get a score and where will the score begin? -- Sam
No score? Let's get him one.
A cash-only lifestyle has its merits, but you've discovered one of its big pitfalls: If you don't have any credit activity, you can't have a credit score. No credit score, no mortgage.
The most-widely used credit score comes from FICO, and it has three conditions before a score can be generated. There must be:
1. No indication that the accountholder is deceased.
2. At least one account that has been open for a minimum of six months.
3. Some activity on an undisputed account in the past six months.
The fact that you wrote me means your husband meets the first criteria, and he had that credit card for more than six months. So it has to be that third item -- a lack of activity in the past six months -- that's the culprit.
It makes sense that the mortgage company suggested he get a new card and use it. Opening a new credit card and using it is one way to trigger a score, but it will take you six months to get there with a new account.
You may be able to shortcut that time if you can find a dormant, but still active, account and restart it. Is it possible you have an old credit account you can reactivate? Maybe a furniture store account? A credit card you haven't canceled? If so, you could be one charge and one payment away from having a score.
To find out, your next step should be to take a deep dive into the credit bureaus' information about him -- and you, too, while you're at it, since it sounds like you'll both be applying for the mortgage. Pull copies of your credit reports from the three agencies (available from annualcreditreport.com for free once a year). Look them over carefully to see what accounts they report. Any dormant but still active accounts should be there. While you're at it, both of you should look them over carefully and dispute any credit report errors.
Next, go to My.CreditCards.com and confirm whether he has a credit score. My.CreditCards.com offers a free credit score based on Equifax data. In your husband's case, to be absolutely certain he has no credit score, go to MyFICO.com to pull the FICO scores from the other two big credit bureaus, Experian and TransUnion. They'll cost about $20 each. Each company keeps separate data files, so it's conceivable that one report will be different, and contain enough information to generate a score. Assuming you're applying jointly for the mortgage, you should get yours, too.
FICO scores begin at 300 and go up to 850. Higher numbers indicate less lending risk. It's entirely possible that your husband's score is nonexistent, and it's not necessarily because of something that he did with the card. Rather, it's likely because of something he did not do, which is to use credit within the past six months.
You asked where his credit score would start, and I can't answer that for sure. The score will be based on whatever information is in the file from his past credit behavior, good or bad.
How long it will take for you to get a mortgage, and at what rate, will depend on your blended credit, assuming you're applying jointly. Lenders will take into account both your scores, your incomes and your down payment, and come to a decision on your risk. The more income you have, the better your joint credit profile, the more money you have for a down payment, the better.
For both of you, then, it's important to buff your credit profile. The more often a person charges and then repays, the more data will appear on the reports. Payment history is the top scoring factor, and in your situation, it's vital to never miss a payment. With your "thin" credit, every on-time payment is crucial, every late payment a potential delay standing between you and getting a mortgage at a decent rate. Your mission, every month, is to charge a little, but pay in full.
Lenders want to know how borrowers manage financial obligations (and several managed well are best) in the recent past. Even an account with a short credit line will help him add information to his credit reports.
So jump-start an old credit account if you can, start a new one if you can't and use your credit well. You'll be on the road to a mortgage in no time.
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Published: November 11, 2015
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