What Is My Credit Score If I Have No Credit History?

What Is My Credit Score If I Have No Credit History?
Written by Publishing Team

According to data from the Consumer Financial Protection Bureau (CFPB), as many as 26 million Americans are “credit invisible,” meaning they have no credit history. In general, this means that no data has been reported to one of the three credit bureaus; Thus they are likely to run into roadblocks if they need to reach a credit limit.

This does not mean that these consumers have a zero credit score. Not having a credit history associated with a consumer profile means that they have no credit score at all. Read on to find out what it means to have no credit history in practice and what steps you can take to build credit.

What does “no credit history” mean?

A credit score is a mathematical probability of paying off debt. Credit bureaus collect information about how you’ve handled debt in the past, which was reported by credit card companies and other lenders (such as student loan and mortgage providers), and then a credit scoring form uses that information to generate your score.

Therefore, not having a credit history does not mean that you have never paid any bills. It just means that none of your bills or expenses have been reported to the credit bureaus.

You may not have a credit history if you’ve never had a credit card or if you’re someone who prefers paying for everything from homes to cars with cash. Not having a credit history doesn’t mean you’re irresponsible either. Instead, it means that you haven’t used the financial products that help you build credit.

Also note that even when you get a credit line, it can take some time for the credit score to appear. According to Experian, a VantageScore can be set as soon as a credit account appears on your credit report.

However, you won’t have a FICO credit score — which 90 percent of top lenders use — until the account is at least six months old. This means that no credit history can be a long-term problem, even after you open your first account.

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Credit bureaus collect information, and the three main centers are TransUnion, Equifax, and Experian. Credit scoring models are similar to mathematical formulas, the most popular being FICO and VantageScore.

How not having a credit history affects your score

Therefore, we have established that no credit history means no credit score. But where will your actual score drop once you start building a credit history?

First, it is important to understand that zero credit scores do not exist. Both the FICO scoring method and VantageScores range from 300 to 850, so your lowest credit score can be as high as 300.

However, credit scores of 300 to 500 are usually reserved for individuals who have defaulted on some debt or those who have debts in collection. That’s why scores in this range are categorized as “poor.”

Although there is no definitive beginning credit score for those first-time builders of credit, the first credit score you see may be closer to the “fair” range than “poor.”

How to check your credit score for free

Do you have a credit score yet? And if you do, is your score higher than you thought? There is only one way to find out. By taking steps to check your credit score, you can find out where you stand – good or bad.

Fortunately, there are many ways to look at your credit score for free. Capital One’s CreditWise program, American Express’s MyCredit Guide, and Chase Credit Journey are available to all consumers, and they all use TransUnion to create VantageScore 3.0 for those who sign up.

If you use any of these sites to check your credit and you don’t have a credit score yet, it most likely means that you don’t have a credit history – or that whatever history you’ve been building hasn’t been registered with credit bureaus yet. Either way, checking your credit score is the best way to know where to start.

Six tips for building your credit score from scratch

If you don’t have enough credit for a credit score yet, building a credit history from scratch can be difficult. The following tips can help you build your credit score from the ground up.

  • Become an authorized user. Becoming an authorized user of a trusted family member’s credit card can help you build credit provided the card issuer reports the authorized user’s activity to credit bureaus. Only use this strategy with someone who pays their bills on time and uses credit responsibly.
  • Get a secured credit card. Secured credit cards require a cash deposit as collateral, but they report your payments to credit bureaus, helping you boost your score. Even better, many secured cards come with bonuses and no annual fees.
  • Consider a Building Credit Loan. A credit building loan from a company like Self requires you to make payments to a savings account that is maintained on your behalf. Since your payments are reported to all three credit bureaus, these loans can help you build credit and save money simultaneously.
  • Report your bill payments to credit bureaus. Find apps that can help you build credit with other bills you pay. For example, Experian Boost can help you build credit with your phone bill, utility bills, and recurring subscription services.
  • Pay your bills on time. The most important factor that makes up your FICO score is your payment history, so always make sure you pay your bills – credit card, student loan, mortgage and all the other things – on time no matter what.
  • Keep your credit card balances low. Once you have a credit card, you can increase your score by keeping your credit usage in check. For the most part, you should strive to keep revolving balances below 30 percent of your available credit at all times.

bottom line

Not having a credit history isn’t the end of the world, and in fact, you can think of it as a clean slate. You may not have any credit history yet, but you haven’t made any credit mistakes that could harm your score for years to come.

Our advice? Take some of the steps above to build credit that can benefit you later in life. With time and responsible use, you will achieve the good credit score you deserve.

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