- Having no credit score simply means you don’t have sufficient credit activity to generate a score
- According to the CFPB, roughly 26 million American adults have no credit history at all
- If you have no credit score, you’ll face more limitations when it comes to qualifying for loans, credit cards, and other forms of credit
- You can still build credit when you have no score by becoming an authorized user, applying for secured credit cards, and more
Your credit score is a key factor creditors use to determine your eligibility for loans or credit cards. It summarizes your recent borrowing history and helps lenders determine your risk level as a borrower.
But what happens if you have no credit score at all? According to the Consumer Financial Protection Bureau (CFPB), that’s the case for roughly 35 million Americans who have insufficient recent credit history to generate a score.
Although having no score isn’t the same as having a bad credit score, it still limits your ability to borrow money or qualify for other forms of credit. Here’s what you need to know about having no credit score — and what you can do about it.
What ‘No Credit Score’ Really Means
“No credit score” doesn’t mean you have a zero credit score. Although there are various credit-scoring models, scores usually range from 300 to 850, with 300 being the lowest possible score. If you have a 300, it means your credit history is loaded with negative marks, and it will be a long uphill climb to clean it up.
In contrast, having no credit score simply means there isn’t enough recent activity on your credit report to generate a score. This is always the case for younger people who haven’t opened any credit accounts or been tied to their parents’ credit cards, for instance. It also occurs if you open accounts with lenders that don’t report to the credit bureaus.
You can also end up without a credit score even when you have open accounts if you stop using them for more than two years. According to the CFPB, 19 million of the 35 million American adults with no credit score are in this boat. The other 26 million are considered “credit invisible,” meaning they have never had enough borrowing activity to generate a score.
How Having No Credit Score Affects Your Financial Life
Even though having no credit score isn’t the red flag for lenders that a low score is, it can still limit your access to loans, credit cards, and other forms of credit. Because you don’t have a recent borrowing history, creditors view you as a question mark, and they’ll be cautious about lending to you.
Having no credit may affect your financial life in various ways. For instance, you might:
- Be unable to qualify for loans or credit cards
- Only qualify with low credit card limits or higher interest rates
- Have trouble getting approved for housing rentals or be required to pay higher security deposits
- Have to pay security deposits to start utility, internet, or cell phone services
- Run into issues when trying to rent a car
- Be disqualified from certain jobs
How To Build Credit Without A Credit Score
Having a credit history makes it much easier to qualify for loans, sign rental contracts, and limit unnecessary expenses like security deposits. That can make having no credit feel like a kind of Catch-22. How are you supposed to get a credit score if you need a credit score to get credit?
Thankfully, it’s not as difficult as it sounds. If you don’t have a credit history, there are several strategies you can use to start building one.
Become An Authorized User
You may not be able to apply for a credit card until you’re 18, but you can start building credit even earlier by becoming an authorized user on a parent’s credit card. Any borrowing and payment activity that happens on the card will also show up on your credit history, giving you a head start toward establishing a credit score.
Apply For Secured Credit Cards Or Credit Builder Loans
Once you turn 18 and have an independent income or a cosigner, you can apply for a credit card of your own. Without a credit score, you’ll probably need to opt for a secured credit card. With these cards, you’ll put down a deposit that then serves as your credit limit. It still helps you build credit, and if you use it responsibly, you can eventually convert it to a standard card.
Credit builder loans are another option designed to help you establish a credit history. You don’t receive the amount from the lender until you’ve paid the agreed amount, and there are fees involved, but it will help you work toward your first score.
Ask Landlords To Report Your Activity
If you’re already renting a house or apartment, your rent payments can help you build credit. However, it may take a little legwork to get these payments reported to the credit bureaus. If they aren’t already signed up, you’ll need to ask your landlord to register with a third-party rent reporting agency or direct reporting service like Experian Boost. There may be fees involved, but fast-tracking your credit-building activity might be worth the extra cost.
Trust The Credit-Building Process And Watch For Pitfalls
Be patient as you take steps to establish your credit. The process takes time, and trying to rush it may backfire. Applying for too many credit cards at once or overusing a secured card could result in negative marks on your report. The best thing you can do is use the credit you have responsibly, pay your bills on time, and trust the process.
If you’re struggling to establish your credit or need to borrow money without much credit history, you have options. When in doubt, reach out to a financial advisor or other trusted financial institutions for guidance about steps you can take to expedite the process.
Frequently Asked Questions (FAQs)
Can You Pass A Credit Check With No Credit History?
If you have no credit history, some lenders may still qualify you for loans based on other information. For instance, you may be able to demonstrate that you’ve paid your rent and utilities on time and that you have sufficient income to make payments. Additionally, many secured credit cards don’t require a credit history.
How Long Does It Take To Build Your Credit From Zero?
There’s no definitive time frame for how long it takes to establish a credit score from scratch. The process usually takes at least a few months. FICO scores require creditors to report account activity for at least six months before it counts toward your score.
Is It Worse To Have No Credit Or Bad Credit?
Having a poor credit score is much harder to overcome than having no credit score at all. Some negative information stays on your credit report for seven to 10 years, and it can take years of good habits to rebuild your credit after something like bankruptcy. In contrast, establishing your first credit score only takes a few months.
What Is Everyone’s Starting Credit Score?
Everyone starts at a different place with their first credit score. Credit scores depend on several factors, from payment history and credit balances to the types and age of your accounts. Your initial score will depend on these details when you begin to access credit for the first time.
Find out more
- Explore the 5 Cs of Credit – Discover the five critical factors that shape your creditworthiness.
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- Can Landlords Affect Your Credit Score? – Learn how your rental history might impact your credit.
- Cheapest Credit Repair Services – Repair your credit without breaking the bank.
- Understanding Credit Repair Cost – Get insights into the costs of credit repair.
- FICO vs VantageScore – Understand the differences between these credit-scoring models.
- Build Credit Fast – Quick tips to improve your credit score rapidly.