But that's another blog !
To get back to the blog at hand...This can be a disaster for some clients, because their bad credit scores from the past remain that way, bad scores. Since there has been no recent activity on their credit report, the bad scores become frozen in time.
That's when Alternative Credit Data comes into play. Lenders understand (yes, they ACTUALLY understand this, at least some of them do) that not everyone uses credit to live. A lot of people use alternative means - barter, money orders, checks (remember checks ?) and cash to actually pay to live. So there is a system set in place where a borrower can use alternative credit to get around normal credit requirements.
First and foremost, a borrower that will use alternative credit must know in advance they will do so, that way they can make sure their cell phone, electrical and gas bills are in their (the borrowers) name. The alternative credit account(s) must be in the borrowers name. Otherwise, alternative credit will not work.
There are different levels, or tiers, given to alternative tradelines:
Each tier has a descending level of importance, with the Tier I alternative tradelines carrying the most weight, and the the Tier III tradelines carrying the least. For instance, proof of 12 months Rental Housing payments are so strong, they often double as Verification of Rent and as one of the necessary three tradelines needed to meet the the alternative tradeline requirements.
There is one caveat to all of this is - with any source of alternative credit provided, you cannot be late. You are putting the last nail in your coffin if you provide documentation with a history of late payments. Take my advice - Don't do it.
This is a win-win situation for the future buyer. You will get the benefit of the goods or services being provided to you from your alternative credit source, and have the ability to tap into this source when you are ready to take the plunge and buy a new home, without the hassle of maintaining the much heralded credit score rating...