Can You Buy a Home Without Credit Score? Yes. Should You? Maybe.

So you're on the market to buy a home - but you don't have credit. Maybe you're a young first-time buyer who hasn't had enough time to establish yourself with a credit history but can't wait to get started. Or maybe you have a credit history - but you haven't made any recent purchases on credit, so there's not enough up-to-date data to generate a score for you. Do you know how to buy a home without a credit history? Is that possible?

Regardless of the reason why you don't have credit, you want to know whether it is even possible to buy this new house. Moreover, you want to think - rightly - about whether you should make such a significant purchase at all given the opportunity. You will have to overcome hurdles if you want to buy a house in this unconventional scenario, but it is possible.

While only you can decide whether a house purchase is right for you or not, this expert-backed guide will give you information about your options and the issues you should consider before committing.

What Is A Credit Score?

A credit score is a number calculated by a credit institution based on your credit history - that is, your repayment history on the debt you have previously taken on. Lenders use this score to assess how likely you are to repay your mortgage or other debt.

5 crucial data points make up a person's credit score. These are:

• Your payment history 35% of the total score
• The total amount you owe 30%
• The length of your credit history or the age of your accounts 15%
• Your type of credit accounts for 10%
• New credit 10%

Why Mortgage Lenders Like To See Your Credit Score

A higher score means that you are more likely to repay your loan, so you are less likely to default and the lender will hold your pocket. As a buyer, a solid credit score can also benefit you in the shape of a lower mortgage rate.

What Score Do You Need To Buy A House?

The credit rating ranges from 300 points at the lower end to 850 points at the upper end.

• If your credit score is 300 to 499 points, you are unlikely to qualify for a mortgage.
• With a minimum credit score of 500 points, you can qualify for a Federal Housing Administration FHA loan with a 10% down payment.
• With a credit score of 620, you begin to qualify for conventional loans that are not backed by the government.
• This credit score also puts you in the range of a Veterans Affairs loan.
• If your credit score is at least 700 points, you can qualify for "jumbo loans," mortgages for higher home prices.
• And with a credit score of 740 or higher, you qualify for traditional loans, which typically have some of the best rates on the market.

Note that the above scores are not technically minimum scores, as you can get many of these loans without having a credit score.

Low Credit vs. No Credit

To be clear, low credit and no credit are different things - and lenders do not view them in the same way. Here's more about why.

Low Credit

Typically, a low credit score means you have missed payments, defaulted on loans, or made other mistakes in your credit history - and lenders see this as risky.

No Credit

No credit could mean a lot, but in general, it means that you haven't taken on any debt - or haven't done so lately. Therefore, there isn't enough reported data to generate a credit score for you.

Why a buyer may not have a credit score:

• The buyer is young, previously financially dependent, and has not had much time to get into debt.
• The buyer is someone from another country buying a home here and is unlikely to have a Canadian credit score.
• The buyer is someone who simply prefers not to take on debt and buys everything in cash or with a debit card.
• The buyer used to have credit