No Credit Score? Here’s How to Build One

A woman looks at her computer.

As a young adult, you’ve likely heard that you need to start building credit in order to make big purchases or get a personal loan later on in life. But if you’ve never had a credit card before, it might not be totally obvious what your credit score is or how to build it. Most likely, you have no credit score at all. But don’t worry—it’s not as bad as it sounds, and it’s easy to start building credit from scratch.

We’ll go over what you need to do if you have no credit score and how to fix it.

What Having No Credit Score Means

Having no credit score means you don’t show up on credit reports and creditors have no way of determining your creditworthiness or your risk level. You’re essentially invisible to creditors. If this sounds like you, you’re not alone. According to the Consumer Financial Protection Bureau, approximately 26 million Americans were “credit invisible” in 2015.

Approximately 45 million Americans have no credit score.

Why You Have No Credit Score

You likely don’t have a credit score because you don’t have a credit history. This means you don’t have loans, credit cards or any other line of credit in your name that is reported to the national credit reporting agencies. The three major credit reporting agencies—Equifax®, Experian® and TransUnion®—have no data on you.

Even if you have a credit card, most major credit bureaus require that your account be active for at least six months before your first credit report shows up. And if you’ve had a credit card for years but haven’t used it for six months and have no other lines of credit, you may not have a credit score anymore.

Check Your Credit History First

You may be surprised to learn that you do have a credit history even if you’ve never opened a credit card with a bank. It may not be a very long history, but things like student loans can show up on a credit report. Each of the major credit bureaus will charge you for a credit report, but thanks to the Fair and Accurate Credit Transactions Act of 2003 (FACTA), you can get a free credit report every year. This is most easily done via

Why No Credit Score Is Better Than a Bad Credit Score

It’s a common misconception that having no credit score means your credit score is zero. Credit scores don’t start at zero—in fact, it’s impossible to have a credit score of zero. The two most common credit scoring systems, FICO® and VantageScore®, have a minimum of 300, and it’s very rare that a person’s credit score would dip that low. Feeling better yet?

What Is a Bad Credit Score?

Typically, any score below a 650 is considered a bad credit score. Though there are “ranges” in credit scores, a score lower than 650 often limits your credit options. A credit score this low is a signal to creditors that you’re risky, and it may be difficult to open new lines of credit or get decent interest rates. For this reason, it’s better to have no credit than “bad” credit. Typically, it’s easier to build a good credit score from scratch than to try to mend a poor one.

How to Build Credit When You Have No Credit

So you want to start building credit. To do so, you need a credit card. But to get a credit card, you need to have a good credit score. It’s a confusing chicken-or-the-egg cycle. 

When you’re first starting to build credit, consider opening a line of credit with the bank that hosts your checking account and debit card. Your banking history can be enough to get you at least a secured line of credit.

1. Apply for a Secured Credit Card With Your Existing Bank

Those new to credit cards typically need a secured credit card. A secured line of credit means that the money in your bank account will act as collateral if you’re unable to pay off your credit card. Having this collateral makes you less of a risk to the creditor, and may be your only option when you’re first building credit. Your credit limit may not be very high, but it’s a good starting point.

Most credit cards are unsecured, meaning that there is no collateral behind the line of credit. They’re riskier because if you don’t make the proper payments, creditors report your debt to major credit agencies or send the debt to collections. The tradeoff is that your credit limit is usually much higher.

Secured vs. Unsecured Credit Cards. Secured: Checking account acts as collateral, lower credit limit, and less risk for creditors and consumers. Unsecured: No collateral, higher credit limit, and more risk for creditors and consumers.

2. Become an Authorized User

If you aren’t ready or able to apply for your own credit card, consider becoming an authorized user on a credit card of a family member or a friend (someone you trust).

Most cards don’t have an age requirement for authorized users, so it’s a great way to start building good and even excellent credit. Just be sure that you completely trust the primary card holder, as your credit could be hurt by late or missed payments.

3. Find a Cosigner

Just like becoming an authorized user, finding a cosigner for a loan can allow someone with better credit to help you build yours. Having a cosigner gives you access to better interest rates and loans that you typically wouldn’t be able to qualify for on your own. However, if you miss payments, both your credit score and your cosigner’s will be negatively affected. 

4. Consider a Credit-Builder Loan

Credit-builder loans, also referred to as “fresh start loans,” are offered by smaller financial institutions and credit unions as a way for people with zero or poor credit history to build credit. The money you borrow goes into an account that you’re unable to access until you repay the loan in full. This way, it’s less risky for the financial institution issuing the loan.

If you’re considering a credit-builder loan, watch out for potentially high interest rates and shop around for the best deal.

5. Report On-Time Payments

After you’ve applied for a credit card with your current bank, see if there are any payments you can report to major credit agencies. Showing an on-time payment history can boost your credit. Common self-reported payments include rent, utilities and cell phone payments. 

You’ll need to go through a third-party service to report these payments—do some research to see who you need to reach out to. Just be sure that you’re confident you can make these payments in full and on time. Otherwise, it may negatively impact your newly established credit score. Once you’ve opened a line of credit and are starting to build your credit score, you’ll need to be patient (sorry). Something that helps determine your credit score is how long you’ve had your accounts open, which can only improve with time. In the meantime, remember these credit-boosting best practices:

Credit-boosting best practices: Pay on time, stick to 30%, limit inquiries, mix it up, give it time.
  • Always make credit card payments on time. You don’t need us to tell you that late or missed monthly payments are bad news for your credit score. Set yourself a reminder to pay your credit card on time every month. Even better, set up an automatic payment to eliminate the stress of remembering. It’s worth it—even one late payment can drop your score by as much as 100 points.
  • Only use 30% of your credit limit. The average credit card limit typically hovers between $5,000 and $10,000, although new credit accounts often have much lower limits. Regardless of your max, make sure you only use about a third of your credit limit at a time.
  • Limit your hard inquiries. These occur when a financial institution such as a credit card issuer or lender officially checks your credit. Avoid applying for a mortgage, a car loan or multiple credit cards all in a relatively short time period. According to FICO®, people with six or more hard inquiries on a credit report may be eight times more likely to go bankrupt than those with zero hard inquiries.
  • Mix up your credit accounts. Don’t rely solely on one line of credit. Creditors like to see a diverse array of credit accounts, including various loans as well as credit cards. Having a mortgage, an auto loan, a student loan and a credit card or two would be a good mix of credit.
  • Be patient and give it time. When it comes to credit, having a long history of consistent payments is one of the best ways to show creditors that you are a safe borrower. Focus on your long-term credit goals.

By following these credit-boosting best practices, you’ll be well on your way to establishing good credit and building smart financial habits. If your credit score isn’t where you’d like it to be, there may be some items on your credit report in error and that you can dispute.

If you’re unsure, takes the guesswork out. We help you track down inaccurate negative information on your credit report and ask the credit bureaus to verify or remove it. We keep monitoring your score so that you can focus less on the logistics and more on what matters—reaching your financial goals.

Posted in Credit 101
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