Should You Worry About No Credit Score? (2024)

FAQs

Should You Worry About No Credit Score? ›

Lenders evaluate people based on how they've used credit in the past. An empty credit report with no evidence of a borrowing history signals to lenders that you're inexperienced. That makes lenders nervous and increases the chances they will deny you for credit like a car loan, credit card or mortgage.

So which scenario is worse — not having any credit or having bad credit? “Neither is good,” says Greg Reeder, CFP, a financial advisor with McClarren Financial Advisors in State College, Pennsylvania. However, “A poor credit score is worse,” he says. “If you have no credit, you can start from the ground up.

In general, people with poor credit or no credit at all face challenges when applying for certain credit cards, especially ones with a low or promotional APR, lucrative rewards, or other perks. Lenders consider these consumers as higher-risk than those with a good credit history, but for different reasons.

Fortunately, no one's credit score can equal zero – the range for FICO scores is 300-850 – and even people with poor or bad credit have a credit score of at least 300. A “no credit score” means there is insufficient information for a credit score calculator to compute a score.

Maybe you've been told your quality of life is only as good as your FICO score or that you can't make it without one. But that's simply not true! The truth is, you can live without a credit score. I know this because I have never borrowed money in my entire life, so my credit score is undetermined.

First off, it's important to understand that credit scores of zero do not exist. Both the FICO and VantageScore scoring methods range from 300 to 850, so the lowest your credit score can go is 300.

If you've had credit in the past but no longer use credit cards, or you have closed accounts on your report, there won't be recent activity to produce a score for you. And even if you have recent credit activity, you still may not have scores if your lenders don't report to the bureaus.

As a general rule, graduate and professional schools are likely to consider a grade of Credit as equivalent to a grade of “C” and a grade of No Credit as a “Fail.”

According to the U.S. Government Accountability Office, as many as 45 million Americans are “credit invisible,” meaning they have no credit history. In most cases, this means they've never had any data reported to one of the three credit bureaus.

1. Apply for a small amount: If you are new to credit and hence don't have a CIBIL score, start small. Apply for a small loan amount as compared to your income. If the bank is convinced that you will be able to afford the EMIs in your income, there are chances that your loan will get sanctioned.

How do I recover from a zero credit score? ›

The fastest ways to increase your credit score include paying bills on time, becoming an authorized user, increasing credit limits without increasing your balances, and paying off debts. Keep in mind, however, that it may take several months to see significant improvements in your score.

While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.

Potentially Harmful to Your Credit

While it may seem counterintuitive, having no debt can actually hurt your credit in some cases. Credit scoring models like to see some level of debt management, so a history of well-managed debt can be beneficial.

Lenders evaluate people based on how they've used credit in the past. An empty credit report with no evidence of a borrowing history signals to lenders that you're inexperienced. That makes lenders nervous and increases the chances they will deny you for credit like a car loan, credit card or mortgage.

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.

That doesn't mean your credit score is zero or even that you have a bad credit score. Without any credit history, you don't fall into any credit range. You're credit invisible.

Yes, it's possible to buy a house without credit. Even for those without an established credit history, there are options available. Alternative methods like cash offers, FHA loans with nontraditional credit or manual underwriting may be worthwhile strategies for buying a home with no credit.

Depending on the credit reporting agency, your score will be between zero and either 1,000 or 1,200. A higher score means the lender will consider you less risky. This could mean getting a better deal and saving money.

While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.