5 Min Read | Updated: October 15, 2023
Originally Published: December 15, 2021
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.
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
At-A-Glance
Millions of Americans don’t have enough of a credit history to merit a credit score.
Credit invisibility is the term used for people who have no credit history and no credit score.
Taking steps to get into the credit scoring system may give you a greater chance of borrowing money and avoiding financial downsides in the future.
Financing can be easier or less expensive when you have a high credit score – buying a home, renting an apartment, getting a phone, buying a car, 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.
The reasons for credit invisibility vary. Some individuals have no information on file with the credit bureaus, while others 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, consumers submit more complaints to the CFPB about inaccurate information on their credit and consumer reports than about any other problem.1
But having no credit score can be as challenging as having a poor credit score, with downsides including:
- Your car insurance premiums could be higher.2
- You may find it difficult to take out certain credit cards.3
- You may find it difficult to get a car loan.4
- You may have a harder time getting approved for a mortgage.
- Your interest rate may be higher for certain credit cards and loans.5
These are some of the reasons that credit-invisible Americans get themselves set up with credit reports and credit scores.
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 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 an 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.6 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.7
Meanwhile, another credit score, VantageScore®, said the most recent version of its model scores 33 million more consumers than other conventional credit scoring models. It uses rent payments, utilities, store credit cards and other means to help people establish new credit files.8
How Long Does It Take to Establish a Credit Score?
Establishing a credit score can take time, and will vary depending on the credit scoring formula that’s being used, as well as how quickly your lender reports the information. Typically, you’ll need to wait until you’ve had least three to six months of account activity before this information can be used to generate a FICO score.9
Tips to Improve Your Credit Health 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.
The Takeaway
Credit scores are an important fact of life for millions of Americans, and having a solid credit history can help many people achieve their financial goals. Even small steps can help you to start building your credit history but it’s a good idea to start sooner rather than later because building credit can take time.
1 CFPB Releases Report Detailing Consumer Complaint Response Deficiencies of the Big Three Credit Bureaus, Consumer Financial Protection Bureau
2 “How does credit score impact your car insurance?,” Bankrate
3,4,5 “How a bad credit score affects you,” Bankrate
6 “Introducing UltraFICO Score,” FICO
7“Experian Boost,” Experian
8 “How to Build Your Credit,” VantageScore
9 “How Long Does It Take to Get a Credit Score After Opening an Account?,” Experian
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