The chances are stiil high. Our industry will look for alternitive trade lines. Rent, Utilities and insuracne  to name a few. Assuming hew has these types of trade lines you should be able to achieve home ownership. Additional strengths help as well. If you have a nice size savings and/or retirement accounts this will be positive.

Additionally, if your husband has a family member (or you) with major credit cards in good standing, see if they can add him as an authorized user.  The key is that the cards need to be in good standing and not even close to being maxed out.

What happens in this instance is that all of their history for that particular trade line becomes HIS history as well.  This should help generate a credit score. 

Dana Wylie:

see if they can add him as an authorized user.  The key is that the cards need to be in good standing and not even close to being maxed out.

What happens in this instance is that all of their history for that particular trade line becomes HIS history as well.  This should help generate a credit score. 

this was done away with in January of '08...you can no longer piggy back on someone else's credit as an authorized user to boost your score...the credit scoring agencies will not factor that history as part of the persons score for the authorized user...

Signing on to someone's account as an authorized user does not give one sufficient credit to qualify for a home loan. This practice is actually frowned upon and should not be going on any longer.

Another option you may have would be to have a parent or family member co-sign through an FHA loan. The co-signer has to be a direct relative and must qualify for a portion of the new payment on top of all of their current debts. Many first time home buyers end up going this route due to limited credit. 

Justin is correct, your husband might want to see about getting rent reported, as well as starting to establish credit today. First thing might be a credit card under both of your names, that way you get the approval.

To the consumer with the question, let me say something that I should have said to begin with.  Do not do ANYTHING with your credit or your husband's credit without first talking to a loan officer.  Nothing, I tell you!  Do not add, do not subtract, do not apply for anything.  This is imperative.  Loans...while they are getting closer and closer to a one size fits all solution...are still not cookie cutter for everyone.  You aren't prequalified on this forum.  There is more than credit involved to do that.  However, the authorized user route is an option to generate a credit score...in addition to other methods...although it isn't widely known that that route is still available.  I also think it's great that you're trying to educate yourself before diving in.

I will explain about the auth user and get a little bit technical for the benefit of all of the loan officers on this forum.

In January 2008 with the upcoming release of FICO 2008, it was reported that the authorized user option would go away.  Up until recently, I was telling my clients exactly what you are reading in earlier posts...that it HAD gone away.  What happened will probably surprise you as much as it did me.  Credit issuers began complaining to Fair Isaac (Fair Isaac Credit Organization = FICO) that the elimination of the authorized user will make it too difficult for them to issue credit.  I believe (don't quote me on this part) that was why FICO 2008 was held up by lawsuits, preventing it to be released on time. Consequently,(and this is the part I know) Fair Isaac complied and updated their scoring software to take into consideration the authorized user again. There are caveats to this agreement, unlike before.  FICO will ONLY take into consideration what it feels are legitimate authorized users, meaning a family member.

And just so you don't feel like I'm pulling this out of my...er...a very dark place, here it is right from the horses mouth at www.fairisaac.com

Credit Scoring Innovation will restore authorized user accounts to calculation of FICO 08 scores

"We have developed technology that will reduce any impact on the FICO® 08 score from intentional tampering, while allowing the scores of spouses and other genuine authorized users to benefit from their shared credit experience." — Lisa Nelson, Fair Isaac

Fair Isaac analysts have created a way to restore authorized user accounts to the calculation of FICO® scores 08, while materially reducing any potential impact to the score from tampering. Fair Isaac is now adding the patent-pending technology advance to its FICO® score formula. Fair Isaac estimates that more than 50 million US consumers are legitimate authorized users on another person’s credit card.

This was dated August 2008.  Now, they're not saying how they can tell if you are a "genuine" authorized user, sneaky buggers, but I believe them.

Justin Alexander:

This practice is actually frowned upon and should not be going on any longer.

Justin, I am unaware that it is actually frowned upon in the lending industry.  Conversely, I have seen many people benefit from this practice, including me and John Ulzheimer (www.Credit.com, the Grand Pubah of credit and stacked with credentials.)  Many current homeowners with great history of their own and high FICO scores started out with a parent adding them on to their credit cards to HELP them qualify for a house (not qualify them completely based on auth user accounts.)  If you could post on this forum or hit me directly about how it's frowned upon, I would be eternally grateful.  My goal is to help...not hurt.  Give me an education!

Otherwise, I hope that everyone finds this information useful.  This is my full time business (credit restoration and credit education), and I'm actually very good at it.  What I'm not good at is plugging myself, but here goes...  If you or your loan officer needs assistance in increasing a credit score, please call me!  Your loan officer will be informed of your progress every step of the way, and I am always available to answer questions regardless of whether you are a current client or not.

Dana

Rosetta Credit Services, LLC

dana@rosettacredit.com

www.RosettaCredit.com

By the way, if you don't currently have a loan officer, I've found the people on this site to be generally very knowledgeable and honest.  Check with one of them!

Getting the borrower on as an authorized user may still work.  I knew that it was going away, but like a lot of legislative measures in the past year, it may have been put on hold or shot down at the last minute.  What I do know is that you do need to speak with a loan officer first before messing with your credit, especially with putting an authorized user on.  As a loan officer, when questions about what is still allowed with the credit companies, I always check my credit professional as laws are changing on a daily basis. 

However, as a loan officer, I know my lenders guidelines, and I do know that some lenders (Union Bank) will not issue a mortgage to anyone with an Authorized User account.  With other conforming loans, lenders will look at authorized user account with more speculation and some deny the loan based the idea that the borrower is trying to falsly minipulate their credit score.  That's why Justin said it is "frowned upon".  A lot of lenders do frown upon it and this is because of all the negative attention authorized user account got in the summer of '07. 

Dana is also correct that it is still allowed and there may be a lender that allows a credit score with an authorized user and no other accounts of their own over 24 months.  I have not run into that scenario in a long time, so I am not sure if it exists.  Like I said, things are changing so quickly these days that you need to consult a loan officer at your earliest oppurtunity. 

Dana, thank you so much for your clarification.  I'll email you this week to discuss what you do and how you can help my clients.

Thank you for your insight Eric. And to elaborate on your response to Dana, yes, it is frowned upon because of the rampid abuse of Authorized User accounts being used to qualify straw buyers over the last couple years. Though this was not a "major scandal" of any sort, many wholesalers discovered this trend early last year and some even sooner. As you know, word spreads quickly in the business and because of this many lenders made it practice to not allow authorized user accounts to QUALIFY for a mortgage. I was at NovaStar as an AE when this new approach came to attention, and many of these deals as suspected, turned out to have fradulent activity involved somewhere in the buying process. 

Obviously Fair Isaac allows for this practicem as Dana provided the verbiage from their website, but the practice was intended to "help" consumers establish fico scores in order to start growing their credit, not to go buy a home. Even though not all of these consumers are aiming at committing fraud, the lending industry has to be vigilant in fighting future attempts. Additionally, the reason it is not "suitable" is because having scores from an authrozied user account does not demonstrate/prove the history of being able to take on and keep up with a large debt such as a mortgage.

As far as my personal opinion which aligns with many lenders who have chosen to deny alternative tradeline borrowers, someone who has not been able to build up a "qualifying" credit history and does not have the means to produce alternative tradelines should not be stepping into a 6 figure debt just yet. Taking 12-24 months to build up payment history in categories of rent and consumer debt are not only essential to meet lender requirements, but also acts as a great assett to assure avoiding "payment shock", which causes many unprepared homeowners to default on their home loan or other obligated debts. 

Eric Leithliter:

Getting the borrower on as an authorized user may still work.  I knew that it was going away, but like a lot of legislative measures in the past year, it may have been put on hold or shot down at the last minute.  What I do know is that you do need to speak with a loan officer first before messing with your credit, especially with putting an authorized user on.  As a loan officer, when questions about what is still allowed with the credit companies, I always check my credit professional as laws are changing on a daily basis. 

 

However, as a loan officer, I know my lenders guidelines, and I do know that some lenders (Union Bank) will not issue a mortgage to anyone with an Authorized User account.  With other conforming loans, lenders will look at authorized user account with more speculation and some deny the loan based the idea that the borrower is trying to falsly minipulate their credit score.  That's why Justin said it is "frowned upon".  A lot of lenders do frown upon it and this is because of all the negative attention authorized user account got in the summer of '07. 

Dana is also correct that it is still allowed and there may be a lender that allows a credit score with an authorized user and no other accounts of their own over 24 months.  I have not run into that scenario in a long time, so I am not sure if it exists.  Like I said, things are changing so quickly these days that you need to consult a loan officer at your earliest oppurtunity. 

Dana, thank you so much for your clarification.  I'll email you this week to discuss what you do and how you can help my clients.

And just to show everyone that this is not me just putting in my personal .02, I located the Fannie Mae Mortgagee Letter addressing Authorized User accounts. Manual underwrites will not allow for any qualifying authorized user accounts, so make sure to check with your lender because some do not allow authorized user accounts at all...

Announcement 08-01  January 31, 2008

Consideration of Authorized Users of Credit

When a credit account owner permits another person, typically a family member who is managing credit for the first time, to have access to and use an account, the user is referred to as an “authorized user” of the account. This practice was originally intended to assist related individuals in legitimately establishing a credit history and credit score based on the account and payment history of the account owner, even though the authorized user is not the account owner. The Selling Guide does not currently address the use or acceptability of authorized user tradelines.

Recently, the industry has witnessed “credit renting” or “piggybacking” schemes. Under these schemes, a person unrelated to the account owner pays the owner a fee to become an authorized user of the account, thus benefitting from the account owner’s good credit to artificially inflate the authorized user’s credit score. Such tradelines are not an accurate reflection of the authorized user’s credit profile.

For manually underwritten loans, credit report tradelines that list a borrower as an “authorized user” can no longer be considered in the underwriting decision, except in the following instances:

• If another borrower in the mortgage transaction is the owner of the tradeline; or

• The borrower can provide written documentation (e.g. canceled checks, payment receipts, etc.) that he or she has been the actual and sole payer of the monthly payment on the account for at least 12 months preceding the date of the application.

If there is written documentation of the borrower’s monthly payments on the authorized user account, then the payment history (particularly any late payments that are indicated) must be considered in the credit analysis and the monthly payment obligation must be included in the debt-to-income ratio.

The effective date for the above requirements is March 1, 2008. Loan applications that are taken on or after March 1, 2008, should comply with these requirements.

The requirements above do not apply to loan casefiles underwritten through Desktop Underwriter®.

I was reading realease notes on DU 7.1 that will be released on Dec 13, 2008 last night.  It helps me fall asleep.  I found a little change to how they view an authorized user account:

DU Version 7.1 will take credit report tradelines designated as “authorized user” tradelines into consideration as part of the DU credit risk assessment.

Lenders will no longer be required to review mortgage loans that include “authorized user” tradelines that belong to a borrower’s spouse when the spouse is not on the mortgage transaction. However, lenders should continue to review credit report tradelines in which the applicant has been designated as an “authorized user” in order to ensure the tradelines

That makes perfect sense but it looks like this is only for spouses, which is more than understandable. They are still fighting fraud for those who "piggy back" on random consumer crerdit accounts to attempt to reflect a credit history that does not resemble their own.

Good find Eric!

Great information, Eric and Justin.  And I feel much better since both of you have posted Fannie's take on it. It's science!  Give me the facts! My suggestion fell within those guides because it did not suggest (nor do I ever) that consumers piggyback on some random person's credit or load up on trade lines to qualify for a home. I am glad there's clarification so there won't be any misinterpretation in the future.  You had me nervous for a moment.

Eric, you did say something that still has me a little bit disturbed.  Union Bank (or others) will DENY a loan if the consumers have any authorized user accounts on their credit profile?  Did I read that correctly?  Can you reiterate for me?  I almost fell out of my chair when I read that.

Great discussion!

Further, it sounds like Fannie and Fair Isaac are becoming more like minded in their practices.

Dana Wylie:

Eric, you did say something that still has me a little bit disturbed.  Union Bank (or others) will DENY a loan if the consumers have any authorized user accounts on their credit profile?  Did I read that correctly?  Can you reiterate for me?  I almost fell out of my chair when I read that.

Dana,

I called Union Bank to clarify their policy on authorized users.  I was incorrect on my previous statement.  You can qualify for Fully Documented loan with authorized credit scores, however the underwriter will need to see multiple non-authorized accounts with a 2 year history to qualify for each borrower.  You cannot qualify for a stated income loan with more than authorized account.  Union is one of the last lenders doing Low Doc qualification, so this was a big deal in my mind.  I apologize for the erroneous info before. 

Not a problem, Eric!  Thanks for all of the leg work.  And it's all good to know.

I think my brain got a little bigger because of this thread.  Can you tell on my pic?