Question: How worried should I be about the age of my credit history when trying to be pre-approved for a home loan?
As long as you have three credit scores, you should be fine. If all the accounts showing on your credit report are less than a year old, it’s possible that you won’t have a score at all. In that case, you’d have to get your loan approved by a “manual underwrite.” This means that you don’t have a “traditional” credit history, so the underwriter looks at “non-traditional credit,” such as rent checks, utility bills, phone bills, etc. to show that you handle your financial obligations responsibly. For most lenders, this will be a government-insured FHA loan, which requires mortgage insurance regardless of how much cash you put down.
One possible workaround is to get someone, like a family member, to allow you to be an Authorized User on one or more of their accounts. By doing this, you will inherit the whole history of that card. You want to be sure about the history, though; you’d defeat the purpose if you were to be an authorized user on a card that had a lot of late payments!
Please don’t misinterpret what I am suggesting here. The authorized user approach is NOT a way to bypass having poor credit, but it can be a way to augment what you have or to flesh out a credit history. If the only credit record you have is in the form of authorized user accounts, it probably won’t help you.
The best way to dispel your worries is to contact a good loan officer in your area and start a pre-approval with them. They’ll pull your credit and submit your loan application to the Automated Underwriting System. Both Fannie Mae and Freddie Mac have their own proprietary systems. You’ll get an outcome in seconds, hopefully, “Approve/Eligible” in the case of Fannie’s system, “Accept” for Freddie’s. The approval will list conditions needed for full approval. Getting this pre-approval shouldn’t cost you anything, but it will let you know without any doubt where you stand and what, if anything, you need to do to get a full approval.
Again, work with a lender who will WORK with you!