Placing Private Mortgage On Credit Report

By: Lance T. Denha, Esq.

Creative financing methods, including private mortgages, make homeownership possible for borrowers who cannot obtain traditional loans. A private mortgage is a contract between two parties, instead of between the bank and buyer. With a seller-financed loan, you make payments directly to the seller. Generally, sellers use the same consequences as lenders if you are late or fail to pay. Unfortunately, the positive mortgage activity often goes unreported to the credit bureaus.

Private Lenders Don’t Usually Report

Familiarize yourself with the credit bureau reporting requirements. Generally, a mortgage history can only appear on your credit report if the loan is serviced by a lender who reports to one of the credit reporting companies. Strict business criteria and financial costs are involved, which make it unrealistic for a private individual to report a single account.

Try a Loan Servicing Company

Talk to the private lender about using a service to report the payment. There are loan servicing companies that serve individual lenders by collecting the taxes, insurance, issuing 1098 statements and even reporting to bureaus. For example, Multi-Financial Services Company services private loans on behalf of lenders and reports the borrower’s loan payments to the credit bureaus. The fee for services starts at around $10 to $15 per loan per month. If the loan is currently serviced by a third party, contact them directly to inquire about having your loan reported to the credit bureaus.

Utilize an Alternative Credit Bureau

Some companies allow consumers to self-report data, including loans, rental payments and phone bills. You will need to provide proof of the mortgage payments, such as copies of the returned checks and contract. Although creditors are more likely to rely on your scores from the major bureaus, some might consider an alternative score if you do not have traditional credit. Payment Reporting Builds Credit is an alternative credit bureau that offers the service free of charge to consumers.

Self-Report to the Major Bureaus

If all else fails, you can try to send copies of your most recent mortgage checks to the three major credit reports along with a copy of the private loan agreement showing the payment due dates. Ask them to include this information on your account. The credit agencies have absolutely no obligation to report private mortgage information but if you don’t ask, you’ll never know. If that gets you nowhere, see if your lender will write a letter describing your good payment history. Send this to the credit bureaus and ask them to attach it to your file. Sadly, this won’t impact your credit score, but it may stand put you in a good position when you apply for credit in the future.