For loan approval, how many months of non-traditional credit is evaluated?

When evaluating non-traditional credit for loan approval, lenders typically examine a period of 12 months. This duration is important because it allows lenders to assess the borrower's creditworthiness based on their payment history for obligations that do not usually appear on a traditional credit report, such as rental payments, utility bills, or other recurring expenses.

By reviewing 12 months of non-traditional credit, lenders gain a more comprehensive picture of the borrower's financial behavior and reliability in making payments on time. This evaluation is particularly helpful for individuals with limited traditional credit histories, such as first-time homebuyers or those who have recently immigrated to the country. The 12-month period strikes a balance, providing sufficient data to inform lending decisions while not extending the evaluation time unnecessarily.

Understanding this timeline is critical for loan officers as they work with clients who may not fit the traditional credit profile, ensuring that they have an accurate assessment of a borrower’s ability to repay a mortgage.