For most people, having “no credit score” means they have an insufficient credit history to generate one. These individuals are considered “credit invisible” and do not have a score of zero, which is reserved for those with a poor credit history.
Being credit invisible is not inherently negative, but it can create significant obstacles when trying to obtain credit. Since lenders have no information on your borrowing behavior, they cannot assess your creditworthiness and will likely be hesitant to approve loans, mortgages, or credit cards.
Common reasons for having no credit score
- New to credit: Many young adults, including college students, or people new to the country have not yet opened any credit accounts.
- Use cash or debit exclusively: If you prefer using cash or a debit card for all purchases and have never taken out a loan or credit card, you will not have a credit history.
- Limited or inactive credit: You may have a “thin file” with very few accounts, or you may have had credit accounts in the past but not used them for a long time (generally over two years).
- Borrowing under someone else’s name: If all the credit accounts in your household are in a spouse or partner’s name, you will not build a credit history for yourself.
- Lender does not report: Some lenders, especially smaller ones, do not report customer payment history to all three credit bureaus (Equifax, Experian, and TransUnion).
How having no credit score affects you
- Difficult to get loans and credit: Lenders may deny your applications for credit cards, auto loans, or mortgages due to a lack of history.
- Higher costs: If you do get approved for credit, it will often be for subprime offers with high interest rates and fees, since you are considered a high-risk borrower.
- Housing and employment issues: Landlords may check your credit when you apply to rent, and some employers may also review your credit as part of a background check.
How to build credit from scratch
- Get a secured credit card: This card requires a cash deposit that becomes your credit limit. You can use it like a regular credit card, and responsible use can help build your credit until you can qualify for an unsecured card.
- Become an authorized user: Ask a family member with excellent credit to add you to their credit card account. Their positive payment history will be reported on your credit report, helping you establish credit. Be aware that their mistakes could also affect your credit.
- Apply for a credit-builder loan: Offered by some banks and credit unions, these loans put the money you borrow into a locked savings account. As you make timely payments, your behavior is reported to the credit bureaus. After the loan term, you get access to the funds.
- Enroll in a rent-reporting service: Some third-party services will report your on-time rent payments to the credit bureaus, but you may have to pay a fee.
- Use alternative data services: Some services, like Experian Boost, allow you to add positive payment history from your utility, phone, and streaming service bills to your Experian credit file.
- Make all payments on time: Regardless of your method, timely payments are the most important factor in building a good credit score.
Unfortunately, there are no quick fixes for no credit score and insufficient credit history. The only way to build trust with lenders is to make consistent payments over time. You must maintain responsible purchasing habits and make regular payments to prove your creditworthiness. If you have no credit score and a insufficient credit history, it’s best to start building your credit now.