No Credit Score: Can People Really Live That Way?

You can’t have a zero credit score but you can have no credit score. Learn why living without a credit score can make some financial goals harder to achieve.

By Karen Lynch | American Express Credit Intel Freelance Contributor

5 Min Read | December 15, 2021 in Credit Score

 

At-A-Glance

Millions of Americans don’t have enough of a credit history to merit a credit score.

Here are ways to help you get into the credit scoring system, so you have a greater chance of borrowing money and avoiding financial downsides.

Much in life can be easier or less expensive when you have a good credit score – buying a home, renting an apartment, getting a phone, buying a car, insuring it, getting a credit card. But no one is born with a credit score, and millions of Americans don’t have one. There’s even a name for it: credit invisibility. Why are some people scored, but others unscored? And how can you get a credit score if you want one?

 

What Does It Mean to Be ‘Credit Invisible’?

Credit invisibility is a classic “Catch-22.” You need to have a history of borrowing and repaying money to be included in the systems of the credit bureaus and scoring agencies that serve banks, credit card companies, and other businesses. But if you try to borrow without a credit score, you’re likely to be denied. And that means you remain invisible, with no credit history and no credit score.


Over 20% of American adults find themselves more or less in this condition, according to the Consumer Financial Protection Bureau (CFPB).1 The reasons vary. Eleven percent have no information on file with the credit bureaus, while the other 12% have a file that the bureaus consider “thin” or “stale.” Some people have no credit score because they’re very young and never had much chance to use credit. Others haven’t used credit for a few years. And yet others make a deliberate choice to live debt free, relying on cash or other unscored means such as checks, debit cards, and prepaid credit cards.

 

Why Do You Need a Credit Score?

Of course, you can live without a credit score; it’s not oxygen. And credit reports and scores are not always easy to live with. It’s important to monitor them, and sometimes you may have to dispute errors you find. In fact, credit reporting is the subject of more complaints to the CFPB than any other debt-related product, usually for inaccuracy.2  

 

But having no credit score can be as challenging as having a poor credit score, with downsides including:

  • Your insurance premium could be higher.
  • Your electric company might ask for a big deposit.
  • A landlord might not rent to you.
  • You’re unlikely to get a mortgage.

These are some of the reasons that millions of credit-invisible Americans get themselves set up with credit reports and credit scores every year, according to the CFPB.3  

 

How do they do it?

 

Even If You Have No Credit Score, You Don’t Have a Zero Credit Score

You don’t usually have a credit report in your name until you get a credit card, personal loan, or some other traditional form of credit. The lender informs one or more credit bureaus of your new account, and credit scores are calculated by the scoring agencies as you build a track record of payments on that account. But your credit score won’t start at zero, because there’s no such thing as a zero credit score. The lowest score you can have is a 300, but if you make responsible financial decisions from the beginning, your starting credit score is more likely to be between 500 and 700.


Most often, when someone goes from credit invisible to visible, it’s a younger person getting their first credit card, often with a parent. But it could also be an older person who paid off their debts long ago and hasn’t borrowed money in a while, or someone who has had financial difficulties in the past.


Here are three typical ways people begin to establish a credit history:

  • Applying for credit jointly, with a friend or relative as cosigner.
  • Becoming an authorized user, also known as an additional card member, on someone else’s account.
  • Signing up for a store card at a favorite retailer, where it may be easier to get approved.

 

Credit Bureaus Try to Make It Easier to Get a Credit Score

If you’re tired of living without credit, a few trends might work in your favor. Credit bureaus and scoring agencies have begun to include alternative data, such as your history of paying rent or cellphone bills on time, in credit reports and scoring models. In this case, “alternative data” means expanding beyond your borrowing track record as their source of credit information. And some have also been implementing new technologies that they say can score more people.


For example, Fair Isaac, provider of the FICO scoring model, has a new “UltraFICO” score that it says could rate over 15 million Americans who don’t have enough credit history to be scored under its traditional model. Qualifications include recent and frequent bank transactions and a history of positive bank balances.4 Experian, one of the major credit bureaus, has been incorporating bill-paying habits for video streaming, phone, and utilities in a service called Experian Boost, which it says helps people with thin credit files.5

 

Meanwhile, another credit score model provider, VantageScore Solutions, said the most recent version of its model uses sophisticated data analysis known as machine learning to accurately score tens of millions of otherwise “unscorable” people.6

 

How to Live With a Credit Score

Just getting onto the credit radar screen doesn’t guarantee you good borrowing terms, like quick approvals and a low interest rate – that takes a good credit score. Here are steps you can take to start building your credit score:

  • Make payments on time every month.
  • Use only a small portion of the total credit limit on all your credit cards.
  • Add alternative data online, as some credit bureaus allow.
  • Regularly check your credit report for accuracy, which you can do for free weekly at AnnualCreditReport.com until April 2022, when free reports are scheduled to revert to one per year from each of the three major credit bureaus: Experian, Equifax, and TransUnion.7

 

The Takeaway

Credit scores are an important fact of life for millions of Americans, and a good credit score helps many people achieve their financial goals at lower cost. For millions of others, though, being “unscored” can make personal finances difficult. The path from unscored to scored is well understood, and credit bureaus are trying to make it easier and more inclusive.

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology, finance, and related public-policy issues for more than 30 years. 

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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