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Why did we get denied!!

We went and saw a mortgage banker in march, she told us clear up your credit and dont open any credit cards and dont acquire any more debt. So we did. We came back in July and September gave her all our alternative lines of credit and everything else we needed to provide. In july the underwriter called and verified our alternative lines of credit. But the sale fell through and the underwriter didnt bother to verify his job and denied us. Well we found another house signed the contract did all the paperwork provided our alternative lines of credit,  wrote letters to explain every lil thing possible. We got the call today we were denied for not having enough trade lines open. The underwriter didnt even call to verify the alternative credit, or employment!
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October 15 2013 - Albuquerque
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Great advice Justin. When you are added on a card, make sure the credit cards have been active for more than 6 months and in good standing.
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October 15 2013
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Ok well that might be really good information to know in the beginning. We were told since none of our debts were new (the "newest" was 5 years old) that they would accept our alternative credit. We cleared them up in March and out credit score has gone up. But we really cant wait another year to buy,  4 kids in an apartment is really cramped!
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October 15 2013
You weren't given accurate advice. If all of your old credit is "bad," then alternative trade lines may not work. This can be a little bit subjective on the part of the underwriter. Usually, one who has no trade lines is someone who has simply chosen not have any debt - ever. This is when alternative forms of credit can be used. Bad credit, even if it's old, without re-establishing new good credit is not the way to do this. You actually should have 1) Opened up a couple of secured credit cards (paying them off each month on time, and 2) Been instructed that it may take several months before the credit scoring kicks in and your score rises.
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October 15 2013
Please do not listen to Travis's advice. There are a couple options I would advise and neither is to apply for 3-4 credit cards. There is absolutely no reason in the world for someone who never uses credit (like yourselves) to open 3-4 cards. Trust me when I say that will do nothing but get you into trouble. Get 1 or 2 cards max. I believe with your history, you will be most comfortable with that. There are lenders out there who will give you a loan with 1 credit card and alternative credit lines. Anyways, here's my professional advice:

1 - Get a secured credit card. You will walk into a bank, give them $300 (example) and tell them you want a secured credit card for $300. You will be able to charge on it like a credit card, but the bank has the added safety of holding on to the max card limit just in case you don't pay your bill. Keep the balance below 30% of your max limit (if your max is $300, keep your balance below $90).

OR

2 - Get added as an authorized user on someone who has an established credit card history. A parent, sibling, ect is a great example. You really don't even need a card. The fact that you are on theirs will bump your score up, assuming they continue responsible usage.

*Also, alternative lines DO report to the credit agencies when you work with a company who gets them to be reported to your credit. They have no effect on your score, but do allow you to obtain financing in some cases.
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October 15 2013
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My husband had a credit card that was closed 5 years ago that never was paid and a phone bill. Nothing new and yes we cleared it all up within a couple days. I know the alternative lines of credit dont up my credit score.
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October 15 2013
Alternative lines don't report to the credit companies so paying those on time will not increase your scores.  Once you finish your loan (not during the process) you should look to apply for 3-4 credit cards for people with lower credit scores.  If you want your score to go up you need to have positive items reporting to the credit agencies.  
Best of luck!
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October 15 2013
I'm assuming that you cleared up your credit as recommended? What needed to be cleared up?
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October 15 2013
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We dont have credit cards, auto loans, or anything like that. Our alternative lines of credit are our car insurance, cable, Internet,  and our rent. We have a credit score but its not great. Thats why we went for an fha.
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October 15 2013
You could ask that same broker to run a simulation on your credit.  This action basically tells you if you did an action (such as paying down a credit card) what if any impact it would have on your scores.  This can only be done within 30 days of the credit pull so call them back up and see if they offer that service.
Best of luck!
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October 15 2013
In general, you need 3 open trade lines of credit... auto loans, credit cards, mortgages, etc. I'm not sure what is showing up on your credit report or what your alternative lines of credit are but here's some tips if you have NO open trade lines of credit:
1. If possible, open one or two new credit cards.
2. NEVER let the balances go over 50% of the available credit and only charge what you can pay off each month (ie. use for groceries, gas, etc and then pay the bill in full).
3. Payoff any collection accounts or derogatory credit.
4. If you have any furniture store accounts or similar, pay the balances down to below 50% of the available credit.
5. NEVER use any type of debt consolidation program - they are treated like bankruptcies.

I hope that helps...  
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October 15 2013

Sorry, to hear that you are going through a tough time getting approved.  So  it appears that you do not have credit scores or you do but do not have enough trade lines on credit report, which one is it?

What types of trade lines are you using and if you are using non-traditional trade lines is one of them rental history?

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October 15 2013
 
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