Having no credit score typically means one of two things – you don’t have enough of a credit history for reporting agencies to calculate a score – or you haven’t had enough recent activity. The credit industry refers to this group as “credit invisible.”
As we’ll see, having no credit score is not the same as having bad credit. It also might be easier to start building your credit score than it is to fix bad credit.
What Is a Credit Score?
A credit score is a number that represents your credit history as reported to credit agencies. Your score acts as a grade of your creditworthiness as a borrower. Lenders use the score to determine the likelihood that you will repay them on time if they grant you a credit card or loan.
When you do get a credit score, compare it to the scoring models of VantageScore and FICO to see how your score rates. These are the two most widely used scoring models for creditors, lenders and other parties.
VantageScore 3.0 is the most widely used VantageScore model. The score ratings range from 300 to 850, which breaks down as follows:
- Excellent Credit: 810-850
- Great Credit: 750-809
- Good Credit: 670-749
- Fair Credit: 560-669
- Poor Credit: 500-559
- Very Poor Credit: 300-499
FICO 8 is FICO’s most commonly used scoring model. The score ratings also range from 300 to 850, but the breakdown is slightly different:
- Excellent: 800 -850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
Why Don’t I Have a Credit Score?
When you don’t have a credit score, it most likely means that you may not have a credit history with the three main credit reporting agencies (TransUnion®, Equifax® and Experian®). It may also mean your payment history doesn’t contain enough recent information to determine a score. Most credit scoring models want to see activity within the past two years.
Here are some common reasons why you may not have a credit score:
- You may not yet have a credit history.
- You may not have borrowed money in the last seven years.
- It could be six months or longer since you last used credit.
- Your credit history might be new and with little credit activity or payment history.
Sometimes people refer to not having a credit score as having a “zero” credit score. While some credit reporting bureaus will show “0” on your report if you don’t have a score yet, it’s impossible to have a zero if you have a credit record. Credit scores typically don’t go any lower than 300. So you either have a score of 300 or above, or you don’t yet have a score.
When Will I Receive My Credit Score?
When opening your first credit account, it may take between three to six months to calculate your credit score.
Different credit scoring companies use different scoring formulas to determine your score, which means the time frame to receive your score may vary. Another factor is how quickly your creditor reports your payment information to the credit bureaus.
Most companies report payments at the end of the billing cycle, so you may want to wait a few months before checking for your credit score. If you don’t see your new account on your credit report after a few months, call your creditor to verify that they report to the credit bureaus. Also, not all creditors report to all credit bureaus, so be sure to check your credit reports from each of the three bureaus: TransUnion, Equifax and Experian.
How to Get Credit When You Don’t Have a Score Yet
Although credit may be more difficult to secure without a credit score, it is possible. Here are the ways that “credit-invisible” consumers may get credit:
Get a Secured Credit Card
As its name suggests, a secured credit card is secured with a cash deposit. The amount you deposit is usually the credit limit.
Apply for a Secured Credit-Builder Loan
A credit-builder loan is a loan that holds the amount borrowed while you make payments. You receive the loan funds once the final payment is made and the loan is paid in full. Not only do you build a positive payment history, but you end up with enough savings for a small emergency fund when the loan term is complete.
Use a Co-Signer or Become an Authorized User
Ask a close friend or family member to co-sign with you on a credit application for a loan or unsecured credit card. Make sure that both the co-signer and you understand that the co-signer must pay the full amount if you don’t pay.
Alternatively, someone close to you may add you as an authorized user on their credit card. That way, the card’s payment history may be added to your credit files. As long as the primary card user has a good payment history, you might benefit from being an authorized user.
Apply for a Store Credit Card
You may find it easier to obtain a retail or gas card, as they often have requirements that differ from conventional credit card companies. You may have a more positive impact on your report through small purchases on the card that you pay off in full each month.
Make Student Loan Payments On Time
If you have a student loan, ensure you are making payments on time and also try to pay more than the minimum due amount. By doing so, you’ll show creditors that you are creditworthy while paying off your loans faster.
Finance a Larger Purchase
You may want to consider financing a bigger purchase with a department store, which is often easier to obtain than a traditional credit card or bank loan. The department store should report your payments to the credit agencies. By making your payments on time, every time, you’ll get a credit history.
Is Having No Score the Same as Bad Credit?
Rest assured that if you don’t have a credit score, it doesn’t mean you have bad credit. The reasons for not having a credit score and for having bad credit are quite different.
If you have bad credit, it is usually the result of one or more of the following:
- You may have late or partial payments from the past. Your payment history makes up 35% of your credit score. Consistent late payments may lead to a poor credit score.
- Your credit file may include a charge off or loan default. When a creditor loses faith in a customer’s ability to pay – due to a customer not paying for several months, they “charge off” the account or put the loan into default. A charge off is one of the most damaging marks on a credit report. Though the insurer is charging off the account, the consumer still owes the debt.
- One or more of your accounts may have been turned over to a collection agency. Creditors may enlist a third-party debt collection company to secure payment from you.
- Your credit card accounts have a high credit utilization ratio. Your credit utilization ratio is how much you owe in revolving credit divided by your credit limit. In other words, if you have a total credit limit of $10,000 and you owe $6,000 in charges and interest, 60% is your credit utilization ratio.
Most VantageScore experts agree that a utilization ratio of 30% or less is a good goal. Those with the highest credit scores tend to a credit utilization of 10% or less.
- You have a bankruptcy on your credit report. Bankruptcy is a serious measure for those who are struggling to pay their outstanding debt and it may negatively affect a debtor’s credit for at seven to 10 years.
- Your credit file includes a home foreclosure. A mortgage lender may foreclose on your home if you get too far behind on your payments. Having a foreclosure on your credit report may make it harder to secure a mortgage loan in the future.
In some cases, lenders may decide that someone with no credit has the same risk level as someone with bad credit – and decline them credit. The good news is, there are lenders that offer products specifically geared towards those with no credit.
The Bottom Line
You may not have a credit score if you have little to no credit activity on your credit report. This is true if you haven’t opened any credit lines yet, or if it’s been more than seven years since you borrowed money, or six months since you used credit.