February 12, 2016
Credit Validation Requirement - Important Update
Effective immediately, an applicant’s
credit score may be validated with at least two eligible trade lines instead of three trade lines as
previously required. Such trade lines
consist of credit accounts (revolving, installment, etc.) with at least twelve
months of repayment history reported on the credit report. Corresponding revisions to the 3555 Handbook will be posted on the USDA Rural Development's Regulation and Guidance website on March 9, 2016.
At least one applicant whose income or
assets are used for qualification must have a valid credit report score or have
at least two historical trade line
references that have existed for at least 12 months to establish a credit
reputation.
For applicants without an established
credit history and unable to establish the required number of eligible trade
lines to validate the credit score, alternative methods may be used to evidence
an applicant's willingness to pay, such as a non-traditional mortgage credit
report or multiple independent verifications of trade references per 7 CFR
3555, Section 3555.151 (i)(6).
Non-traditional credit may not be
used to enhance poor payment records or low credit scores. GUS applications receiving an “Accept”
underwriting recommendation, but which fail to meet the credit score validation
test using a traditional credit report, must be downgraded to a “Refer” by the
lender. In these instances the use of a
non-traditional credit history will be required in order to proceed.
Thank you for your support of the Single
Family Housing Guaranteed Loan Program. Questions
regarding this announcement may be directed to the National Office Division at
(202) 720-1452.
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