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If you don't have a credit score, it may be because there isn't enough information in your credit history, or because there aren't any records there at all. Credit scores are generated using scoring algorithms, or advanced statistical models that use the information in your credit history to assign you a three-digit score. Without enough credit history, the algorithm won't have enough information to fairly assess you and likely won't be able to assign you a credit score.
Reasons You May Not Have a Credit Score
There are a number of reasons you may not have enough credit history to generate a credit score, which can include:
- You have never used traditional credit accounts. Your credit history will begin only when a creditor—such as a credit card issuer or lender—reports a record of you opening an account to one or more of the three major credit bureaus (Experian, TransUnion and Equifax). Without at least some record of credit in your name, a credit score cannot be populated as there is no past behavior on which to assess your creditworthiness. If you tend to use cash or debit and don't rely on any credit, you could have nothing in your credit history and lack a credit score as a result.
- You have not used credit in more than 24 months. Once you've opened an account it's important to use it—at least occasionally—so lenders and scoring algorithms can see how you are handling your credit. If you have credit but don't use it for more than 24 months, your credit file may lack the data necessary to populate a credit score. Remember, payment history is one of the most important aspects of calculating your credit score, so the more on-time payment activity you have, the better your score will be.
- You're a recent immigrant. Immigrants often don't have a credit score because they have never before applied for or used credit in the United States. Even if you have an established credit score from another country, none of those records will count toward your U.S. credit score. If you're an immigrant, consider opening a line of credit as soon as possible to establish your credit history and begin building your score.
- You're young and have no experience with credit. Many young people don't have credit and may have no idea where to start. Since your credit history begins only when a creditor reports a new account to the credit bureaus, starting early is key to having a top score later in life. To establish credit as a young consumer, consider applying for a credit card and using it for essential purchases. Remember to pay all your bills on time, as payment history is the most important aspect of having a good score.
- You've only recently applied for credit for the first time. If you're new to credit and just applied for a new account, it may take some time before you see a credit score. Since credit scores are based on your past experience managing debt, in many cases you'll need to make several payments or have your new account open for a period of time before a scoring algorithm will have enough data to establish your credit score.
Why Do You Want a Credit Score?
Credit scores are an important aspect of your financial health, and having a good score can mean improved access to loans and better interest rates and borrowing terms. Obtaining new credit is often dependent on a credit check, where a lender evaluates your borrowing history and decides whether to approve you for the loan. Having a good credit score in this process can help you get approved and also can help you get better terms and interest rates that will save you money over the life of the loan.
People with higher credit scores can shop around with multiple lenders to find the loan with the best terms and the lowest rate. Lower interest rates can save you a lot of money over time: Reducing a mortgage loan's interest by just one percentage point can result in tens of thousands of dollars in savings.
What Is a Good Credit Score?
For FICO® Scores between 300 and 850, the ranges are categorized as follows:
- 800 and above: Exceptional
- 740 to 799: Very Good
- 670 to 739: Good
- 580 to 669: Fair
- 579 and below: Very Poor
To have a very good or exceptional score, you'll need to have a long and sustained history of making payments on time. Payment history is the most important aspect of calculating credit scores and any blemishes in it can negatively impact your scores. Other things that factor into your score include how long you've been using credit, how much debt you have, what types of credit you use and how often you apply for new credit.
How to Establish Credit
The good news is that there are plenty of ways to build credit if you've never had experience with it before:
- Apply for a Secured Credit Card
Secured credit cards are perfect for users trying to build a payment history from the ground up. They work like other credit cards when you make a purchase, but you must make a cash deposit when you open the account to back up your usage. That deposit, which is typically the same amount as your credit limit, is what "secures" the card.
Otherwise, you use the card in the same way: Make purchases, pay them off by the due date and pay interest on any charges you don't pay off in full. If you don't make your payments, however, your secured deposit is deducted.
Typically, you can use a secured card for a period of time to build up a credit history, after which you can convert the card to an unsecured option or apply for a regular credit card.
- Get a Cosigner on a Credit Card
You can also apply for a credit card with a cosigner who has solid payment history. This is a good option for students who are just starting out and can get a card with their parents. However, the cosigner should know that if you do miss payments or carry a huge balance, their credit scores will also be affected.
- Apply for a Retail Store Card
The first credit cards for some people are often retail store cards, which can be easier to qualify for and typically offer lower credit limits. They can also qualify you for discounts on purchases at that retailer. If you don't have much history with credit, retail cards can be a possible option for establishing a credit history, but they can also include some pitfalls, like high interest rates and fees.
- Get a Credit-Builder Loan
Credit-builder loans are solely designed to help you improve your credit score, so they function differently than other loans. Instead of giving you the loan amount up front, the lender sets it aside in a savings or certificate of deposit (CD) account.
Then, once you've finished making payments, the lender gives you the funds, plus the interest accrued from the savings or CD account. Since the lender holds onto the cash from the beginning, many credit-builder loans offer decent interest rates.
Make sure the lender reports your payment history to Experian or one of the other credit reporting companies so the loan helps you build your credit history.
- Become an Authorized User on Someone Else's Credit Card
Another option is to piggyback off an already-open account as an authorized user instead of getting a cosigner. A parent, spouse, other family member or even a close friend can add you to their credit card account with a separate card. You will build a credit history based on the usage of that card, but the primary cardholder will be the one who must pay off any charges. If you're going with this method, be sure to establish rules with the primary cardholder regarding how you will use the card.
If you're not sure if you have a credit score, or want to find out what's in your credit history, consider getting a free copy of your credit report and scores from Experian so you can see exactly what is listed in your file. Checking your credit is a great first step to figuring out how to improve it, so the sooner you check the closer you'll be to raising your score over time.