No credit score means zero credit score
Perhaps the most frustrating thing about credit is the chicken-and-egg problem in establishing it – no one wants to give you credit when you’re not used to using credit.
But if you’ve never had credit and don’t have credit score, it does not mean that you have a zero credit score. You have no score: you are “invisible credit”.
Why you don’t have a credit score
No one has a zero credit score, no matter how badly they’ve managed credit in the past.
The most widely used credit scores, FICO and VantageScore, range from 300 to 850. Only 1% of consumers have a FICO score below 470, according to Tommy Lee, senior scientist at FICO. He said scores of 300 are “extremely rare”.
The reasons why you might not have a score are:
You have never been registered for a credit account.
You haven’t used credit for at least six months.
You recently requested credit or been added to an account.
What is the starting point of your score?
Just like being new to credit doesn’t mean you start from scratch, it doesn’t mean you start basement at 300. After all, if you’ve never had credit , you’ve never made devastating mistakes.
Think of it as the first pop quiz of the school year. If you missed it because you were at the dentist, it’s different being in class and then answering each question incorrectly. Eventually your teacher will evaluate your performance, but not until there is no data.
When you have no credit history, the credit bureaus you don’t know enough about yourself to guess whether you will repay the borrowed money. And that’s all a credit score is – an estimate of how likely you’ll pay off the next credit granted to you, based on your data. credit reports.
Once you start using the credit, the scores can be calculated. Your score won’t start at the top, but it won’t be at the bottom of the scale either.
How to get credit in the first place
To go to the credit bureaus and develop a credit history, you must apply for credit. Two products specially designed to help create credit are:
Secured credit cards. These credit cards, as the name suggests, are cash secured. The deposit is usually the credit limit.
Credit-creating loans. These are loans that are only given to you after you have made the payments. They can be a good way to build a payment history and accumulate a small emergency fund at the end of a loan.
Before applying, request a free credit report from each of the three credit bureaus. You are entitled to one per agency each year. If you’ve never had credit but have a file, that’s a red flag: maybe someone else’s information has been mixed up with yours, or someone is using your identity to obtain credit. Challenge all errors to clean them up.
Once you’ve approved your first lines of credit, follow these basic rules:
Pay your bills on time, every time. Payment history influences your scores the most.
Use only a small portion of your credit limit. Keep your balances at less than 30% of your limit, and the lower the better.
Aim for a mix of account types – for example, installment loans with regular payments, such as a car loan, and revolving debt, such as credit cards.
Follow these steps and you will be growing your credit reports in no time. You will also have established a credit score that will allow you to lower interest rates and access better credit products – an unsecured credit card or a card that offers rewards, for example.
Don’t focus on the numbers
Do you know what credit experts are saying about credit scores? Don’t get too addicted to numbers. Your credit score is recalculated on demand, whether requested 10 minutes or 10 months after the last request, and it takes into account the most recent additions to your credit reports.
Rod Griffin, director of public education at Experian, one of the three major credit bureaus, says you should instead focus on your “general risk” category. Each lender can define their own parameters, but generally the credit score range looks like this: