No Credit Score: What Does it Mean?

FT Contributor  | 

For small or everyday purchases, not having credit history or a credit score isn’t an issue. You simply need to furnish payment for your purchase to complete the transaction. However, if you try to buy a large-ticket item, such as a house or boat, credit is an important piece of the puzzle.

Oftentimes, your credit score and history are what determine whether you qualify to finance the purchase. If you’re planning for a big purchase in the future or you’re considering applying for a credit card, chances are the lender or credit card company will pull your credit report.

The history and score that’s provided on the report determine whether you’re eligible to make the purchase and the terms offered to you. Learning more about what it means if you have no credit score will help you fix this issue so you can become a qualified borrower.

What Does It Mean to Have No Credit Score?

When you don’t have a credit score, you have no credit history. Your credit score is created based on your behaviors and actions as a borrower and consumer. If you don’t have any history of taking out loans or using credit cards, the credit bureaus have no way of calculating your credit score.

Without a credit score, your lending options are limited. Most lenders use your credit score and history to predict how trustworthy you’ll be as a borrower. Without a score at all, you may be automatically disqualified from certain types of loans and borrowing options.

This can also happen if you have a bad credit score. A bad or low credit score shows that you have unfavorable credit history. You may have too much debt or have made loan or credit card payments late — or not at all.

You may also have a low credit score if you defaulted on loans, filed for bankruptcy, or have liens on your properties or possessions. Having a low credit score is different from having no credit score because with a low score you still have a reported credit history.

Why You Need a Credit Score

Having a good credit score shows that you’ve been a responsible borrower in the past. Lenders use your credit history and score to determine how much risk they’re taking on by offering you a loan or credit card.

If you don’t have any history or score to review, lenders may not feel you’re equipped to pay back their loan on time and in full. A lack of experience with finances can sometimes be just as bad as negative items on your credit report.

Without a credit score, you may run into a problem if you attempt to finance purchases or engage in certain financial transactions, such as a:

  • Vehicle purchase: When you apply for an auto loan, the lender checks your credit to determine if you qualify. With no credit score, you may need to consider leasing a vehicle with a dealer that doesn’t require a credit check or purchasing a car that doesn’t require financing.
  • Business loan: To apply for a business loan with a financial institution, you must have a credit score so the lender knows your creditworthiness before deciding if you qualify as a borrower. Without a credit score, you may need to borrow money from friends and family or offer extensive collateral for a loan.
  • Home purchase: When you purchase a home, you’ll likely need to apply for a mortgage to finance it. You must have a good credit score to qualify for a home loan with favorable terms.
  • Credit card: When you apply for a rewards credit card, your credit score is important. You must authorize a credit check so the company can look at your credit history and determine if you’re eligible for the card. Without history, you may be denied for a credit card or offered a card with a low credit limit and high interest rate.

Before you can make these purchases or engage in these financial transactions, build your credit history so you have a credit score to provide to a lender or financial institution.

How to Get Credit When You Have None

If you don’t have credit, there are several ways you can build your history so your report begins to show a score. To build your credit and begin increasing your credit score, consider:

  • Applying for a store credit card: Credit cards you apply for through a retailer generally have lenient credit score requirements. If you display responsible financial habits as a cardholder, it helps build your history and credit score.
  • Applying for a credit builder loan: Consumers who want to repair their credit or build history can provide a deposit to a financial institution for a credit builder loan. It’s a small loan you pay back over a short period of time with the ultimate goal of building your credit.
  • Becoming an authorized user: When a friend or family member adds you as an authorized user to their credit card, you don’t even need to charge the card or pay the bill to reap the benefits. The activity on the card is automatically associated with your credit report.
  • Choosing your rental wisely: If you’re a renter, consider only renting your home from a company that reports your actions to the credit bureaus. If you’re responsible and pay rent on time, it’ll help build positive credit.
  • Applying for a secured credit card: Provide a deposit to receive a secured credit card and pay it off each month. These cards are specifically designed for consumers focused on building credit because they provide positive history with responsible use.
  • Asking for a cosigner: If you don’t qualify for a loan, consider asking a person with a good credit score to be your cosigner. Be sure they understand that if you default on the loan, they’re responsible for paying it off.

Without a credit score, applying for a loan or line of credit with favorable terms may be impossible. When you dedicate time and effort to building your credit history, your score begins to increase, opening you up to additional financial opportunities.


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