According to a published FICO report, there are over 50 million FICO score qualified people without a credit score. It is therefore advisable to always check your score to know where you stand in terms of financial possibilities. That said, what does it mean when you have no credit score? We have expounded more on this below.
Why You Don’t Have a Credit Score
While there are several reasons why you don’t have a credit score, this doesn’t mean you have a bad credit score. Here is why you may not have a credit score:
- You haven’t applied for a loan in the last 7 years.
Since your credit score is calculated from your credit, your credit report is therefore blank.
- You are young or fresh from college
If you don’t have a credit card or haven’t taken a student loan at this stage, you have no credit history because you haven’t yet been listed on any credit account.
- You have moved to a new country
If you relocate to a new country, credit bureaus may have no information that can be used to give you a score.
- You have opened inactive accounts for the past 2 years.
This also goes for any credit cards not used within the last 2 years or you have closed accounts appearing on your report.
- Your lenders don’t report any information to any of the three credit bureaus
While they aren’t required by any law to report to any of them, if the creditors fail to report, your credit history will be very thin.
- You haven’t applied for or used credit in the last 6 months.
This means your recent reports are very thin. Banks and other lenders can’t calculate a credit score from a thin file because the information isn’t enough
Why Your Business Doesn’t Have a Score
Upcoming businesses and startups can also lack a credit score. Business accounts with no credit scores are assigned the code 9002. This means that there aren’t enough credit account records (trade lines) for calculating a typical credit score. The business profile report lacks sufficient trade lines to satisfy credit bureaus in the following ways
- Lack of a Status date for the last 6 months
- No balance in the last 6 months
Unlike individuals, Experian calculates your business score using an Intelliscore Plus algorithm which gives a range from 1-100. The closer the score is to 100, the better it is for any business.
For a business to have a proper credit score, they need to:
- Have a line of trade that has been open for 6 months or longer
- Have at least one undisputed account. It shouldn’t have been reported to Experian within the past 6 months.
- There also shouldn’t be an “indication of deceased” on the business credit report.
What are your Credit Options If You Lack a Credit Score?
Here are your options:
- Credit Builder Loans
These are loans that you apply for but you have to pay up before receiving the funds. If you applied for a $10,000 loan, with an interest of $2000 and your monthly payment is 1,000, it should take you at least 1 year to repay.
During the 12 months of paying up, you will be building your credit score. Once you’ve finished paying, you will be given access to the $10000.
- Secured Credit Cards
Without a credit history, you can’t get a traditional credit card; you get a secured card. A secured card differs from a regular one in that you are required to make a deposit against the credit limit of the card- if your deposit is $500; your credit limit becomes$500.
- Getting Store credit cards
These are cards offered by retail shops with which you can only buy things from those stores. They will help you build your credit score while getting access to items you need
- Finding a Cosigner
This can be a family member or a friend with a strong credit history who cosigns your loan to help you establish a credit history. They help you get better interest rates when building your score.
- Become a credit card-authorized user
You can be added to a credit card account by a close person, giving you access to the credit. As an authorized user you can start building credit. For this to be effective, your creditors need to report your authorized user account to the credit bureaus
The Take-Away
While you may rejoice in having no debt and not taking loans, this may work against you when you need large sums of money that require taking credit. To be on the safer side, you should aim at building an impressive credit score, and a good one. This will go a long way in shielding you from limitations brought about by not having a score at all.
