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Not having a credit score isn't necessarily bad, but it's not ideal. It can prevent you from qualifying for loans, credit cards and housing and complicate your ability to rent cars and get cellphone and cable subscriptions. Establishing credit as early as possible is a good way to set yourself up for the future.
What It Means to Have No Credit Score
People who have no credit history are known as credit invisible. Credit invisibility is typically due to the lack of credit accounts or the result of not using credit for a long period of time, resulting in information being removed from your credit history. With no credit history, there is nothing that can be used to calculate a credit score.
Your credit reports record your history of borrowing money and repaying debts, and a credit score is calculated using data recorded in one of your credit reports. The common reason for credit invisibility is the lack of any credit report, meaning you have no credit accounts in your name. This is common among young people over the age of 18 (the youngest age at which you can legally borrow money) who haven't yet applied for or obtained any loans or credit, but it also can affect older individuals who've never had credit in their own names and recent immigrants of all ages.
It's possible to be credit visible if you have credit reports but not able to have a credit score calculated because they reflect no use of borrowed money or debt payments in the past six months. This occurs most commonly among retirees who may have paid off their mortgages and other debts, and have no open loans or active credit cards for an extended stretch of time.
Why It Matters to Have No Credit Score
- Difficulty getting credit: The main reason credit scores and reports exist is so financial institutions, credit card issuers and other lenders can gauge the likelihood you'll repay your debts as agreed. It's not surprising then that being credit invisible can make it difficult to get loans and credit cards.
- Issues with housing rentals: Many landlords and property management companies check credit scores as part of their tenant-screening processes. The lack of a credit score isn't grounds for denying you housing, but if there are multiple applicants for the same unit, it's possible that someone with a strong credit score will be chosen over an applicant with no score. What's more, if a credit-invisible applicant secures an apartment, many landlords will charge them a higher security deposit than they would an applicant with an established credit history. That's because the lack of credit experience can mean a higher risk of missed or late rent payments.
- Higher security deposits: Housing isn't the only realm in which lack of a credit score can result in higher deposit requirements. Cellphone carriers who let you pay off a new phone in installments, and cable and internet providers who lease equipment may check your credit and charge you higher security deposits if you're credit invisible.
- Car-rental challenges: Car rental companies typically require you to present a credit card when you pick up your vehicle. If you use a debit card, the car-rental company may check your credit score before agreeing to give you a vehicle. If you have no credit score, you might not be able to rent a car at all.
- Employment concerns: Employers, especially when hiring for jobs with financial responsibilities, may check a special version of your credit report to gauge your ability to handle money responsibly. Employer credit checks don't include credit scores, but the hiring company won't be able to complete this step if you're credit invisible and you could lose out to another applicant with a proven credit track record.
How to Build Credit
Establishing a credit history when you don't have a credit score may sound impossible, but there are proven strategies for becoming credit visible:
- Become an authorized user on a friend or relative's credit card. You get a card in your name and many lenders report the payment history to the authorized user's credit report as well as the primary account holder's. That account history can help you establish credit reports in your name so a credit score can be calculated. As long as the account is managed responsibly, those on-time payments can help your scores improve over time.
- Get a secured credit card. With a secured credit card, you make a cash deposit as collateral, and that amount typically serves as your borrowing limit. As long as your lender reports to the credit reporting companies, using the card and making timely payments each month can help you establish a positive payment history and show lenders that you know how to use credit responsibly. Consistently making on-time payments will help you build your scores over time and, after six months to a year, can potentially enable you to qualify for a traditional unsecured credit card.
- Seek a credit-builder loan. Available through many credit unions, these specialized loans help the credit invisible and individuals with damaged credit establish good payment records and save some money at the same time. Here's how they work: You borrow a small amount—typically less than $1,000—that the lender puts in a savings account you can't touch instead of turning over to you in a lump sum. (If you fail to make required payments, the lender can keep the loan amount.) When you repay the loan, the savings account is yours—and your payments will have established credit reports and ended your credit invisibility. It typically takes about six to 24 months to repay a credit-builder loan.
- Enroll in Experian Go™. This free program allows you to create your own Experian credit report even if you're credit invisible. Experian Go works in conjunction with Experian Boost®ø, which can help you become immediately scoreable by adding your history of on-time utility, cellphone and streaming-service payments to your Experian credit report.
The disadvantages of credit invisibility are numerous, but with a little effort, it's possible to "be seen" and reap the benefits of greater access to credit. To keep tabs on your progress establishing your credit, create an Experian account to see your credit report and score for free, or download the Experian app.
How Long Does It Take to Establish a Credit Score?
Establishing a credit score can be somewhat time-intensive: Typically, within a few weeks after you open your first loan or credit card account, the lender reports it to the national credit bureaus and then, within a few weeks, you'll have a credit report established at each bureau. Only after a credit report reflects an account that has been open for at least six months, with at least one payment reported during that period, will it be able to be used to generate a FICO® Score☉ .
Experian Go™, on the other hand, allows you to establish an Experian credit report instantly and potentially start building your credit history right away by using Experian Boost to add regular bill payments you've made in the past. Experian Go can also help you determine other options for building credit by asking a few questions about your income and finances. Besides saving you the month or two that's typically required for your credit report to appear, Experian Go offers guidance on how to establish a credit score as quickly as possible. Depending on your responses, it could lead to credit offers that let you open an account quickly and start logging scoreable credit activity right away.
The Bottom Line
There are far worse problems in life than lack of a credit score, but credit scores are used in so many ways these days that for many individuals, establishing credit reports and credit scores sooner than later can make everyday activities much easier. Doing so also lets you begin building up your credit scores, so you'll have the financial flexibility to finance large purchases in the future.