In some ways, having no credit can be just as bad as having poor credit.
In some ways, having no credit can be just as bad as having poor credit.
We all know that having a low credit score can make it difficult to borrow money, whether in the form of a new credit card, mortgage, or personal loan. But what happens when you have no credit at all?
If you've never had any bills in your name, it's easy to land in a situation in which the major credit bureaus (Experian, Equifax, and TransUnion) are unable to assign you a score. In fact, nearly one in five Americans has no credit score at all, according to a new research study by The Ascent. If you're part of that statistic, it pays to work on establishing credit sooner rather than later.
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Is no credit the same as bad credit?
There's a difference between having bad credit and having no credit. When you have bad credit, you've proven yourself financially irresponsible, and you'll need to work on bringing your score up to have a chance at borrowing money affordably.
When you have no credit, you don't have that same black mark -- but in practice, the results could be the same as having bad credit. You most likely won't get to borrow money when you want or need to, since lenders will have no easy way of determining whether you're a trustworthy borrower or not. And not having a credit score could make it difficult to rent an apartment -- a scenario in which you're not borrowing money per se but asking someone to bank on the fact that you're financially reliable.
However, the good news is that it's often easier to go from no credit to good credit than it is to go from bad credit to good credit, and once you know how to build a credit score, you can take steps to start yourself out with a positive one.
How to build a credit score
For the record, it's possible to have a credit report without an actual score. For example, if your credit accounts are fairly new, you may need to wait for that information to get reported to the bureaus that compile your score.
That said, here are three steps you can take to establish a credit history.
1. Pay cable and utility bills on time
You can start by signing up for a few bills in your name. If you live at home and your parents currently pay the cable and utility bills, ask to take those over. By establishing a pattern of on-time payments, you'll not only get yourself on the bureaus' radar, but help yourself start out with a good credit score.
2. Use a secured credit card
Another option? Open a secured credit card and start making payments on it. A secured credit card works differently than a regular credit card. Rather than being assigned a spending limit, you put down a deposit that serves as your personal credit limit. Then, as you make charges on that card and pay your bills on time, that responsible behavior gets recorded and reported to the three bureaus.
3. Become an authorized credit card user
You can also ask a family member to add you as an authorized user to his or her credit card. Even if you don't actually use that card yourself, if the person who adds you makes timely payments on that account, that information gets tacked on to your own credit history, thereby helping you not only build credit, but build good credit.
Remember, it can take time to build a credit score, so don't be discouraged if you're not given one right away. But if you follow the above tips, in time you should have a credit score to your name -- and hopefully a strong one.
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FAQs
Another 11% are considered to be "credit invisible," meaning that they don't have a credit file with any of the three major credit bureaus. That's a total of 22% of the adult population of the United States that doesn't have a FICO credit score at all.
What percentage of Americans have bad credit? ›
22% of U.S. Consumers Have Exceptional Credit
| Percentage of Consumers by FICO® Score 8 Range | |
|---|
| Range | Percentage of Consumers |
|---|
| Poor (300-579) | 12.6% |
| Fair (580-669) | 15.8% |
| Good (670-739) | 21.6% |
2 more rowsApr 17, 2024
People don't get credit score from credit bureaus either because they are new to credit or their credit history is negligible for bureaus to even consider. If you want to build a healthy credit score, make sure you use your credit card regularly.
Why doesn't Dave Ramsey have a credit score? ›
In order to earn good credit, you need to show creditors you can make payments on time and use your credit cards responsibly without maxing them out. Since Ramsey doesn't borrow, he won't be able to do that. And, for the finance guru, it's just fine not to have a credit score.
How many people have 0 credit score? ›
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.
How many Americans don't have credit history? ›
In 2015, we published a report finding that 26 million Americans are “credit invisible.” This figure indicates that one in every ten adults does not have any credit history with one of the three nationwide credit reporting companies.
What is the poorest credit score? ›
What is a bad FICO credit score?
- Poor: 300-579.
- Fair: 580-669.
- Good: 670-739.
- Very Good: 740-799.
- Exceptional: 800-850.
Mississippi has the lowest average FICO credit score, with an average FICO score of 680.
What is the lowest credit score in the world? ›
What is the lowest credit score possible? Generally, credit scores range from 300 to 850, making 300 the lowest possible credit score. But it's important to note that you typically have more than one credit score. And they may differ depending on the credit-scoring company and when they were calculated.
Can you really live without a credit score? ›
It may be possible to live without credit if you aren't already borrowing through student loans, a mortgage or other debt. Even so, living credit-free can be very difficult. Tasks such as finding an apartment or financing a car can become challenging obstacles without credit.
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.
Can I get a loan with 0 credit score? ›
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.
Was Dave Ramsey ever in debt? ›
Career. By 1986, Ramsey had amassed a portfolio worth over $4 million. However, when the Competitive Equality Banking Act of 1987 took effect, several banks changed ownership and called his $1.2 million in loans and lines of credit because he was over-leveraged. Ramsey was unable to pay and filed for bankruptcy in 1988 ...
What does Dave Ramsey think of FICO? ›
2 Instagram post, Ramsey said, “Here me clearly on this: The credit score is NOT a measure of winning financially. It is 100% based on debt. The credit (or FICO) score is simply an 'I love debt' rating. No part of the credit score calculation even hints at how much wealth you have.”
Does Dave Ramsey believe in good debt? ›
Dave Ramsey is not a fan of debt. In fact, the finance guru believes that borrowing money is always dumb. But, while Ramsey may have a case that certain kinds of loans or credit cards can get you in trouble, viewing all debt as bad is simply not a sound approach to making financial decisions.
Is it possible to have 0 credit score? ›
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.
What percentage of Americans have a credit score over 800? ›
Credit score distribution: How rare is an exceptional 800 to 850 score? Twenty-three percent of Americans have a credit score between 800 and 850, considered "exceptional" by FICO. A credit score at the top of that range -- 850 -- is considered a perfect score.
What percent of Americans have a 700 credit score? ›
The average FICO credit score in the U.S. was 715 (good) in the third quarter of 2023. That's up 26 points from 689 (also good) in the third quarter of 2010. 71.3% of Americans have a FICO Score of 670 (good) or better. 21.2% have an exceptional FICO credit score of 800 or above.
