Is it bad to have no credit score?

Not having a credit score isn’t necessarily bad, but it’s not ideal. It can prevent you from qualifying for loans, purchasing a car, obtaining credit cards and acquiring housing, in addition to complicating your ability to rent cars and get cellphone and cable subscriptions. ¬†Establishing credit as early as possible is a good way to set yourself up for the future.

What it means to have no credit score

Your credit reports show your history of borrowing money and repaying debts and a credit score is calculated using data recorded in one of your credit reports. People who have no credit history are known as credit invisible. Credit invisibility is typically due to the lack of credit accounts or the result of not using credit for a long period of time, resulting in information being removed from your credit history.

With no credit history, there is nothing that can be used to calculate a credit score. This is common among young people over the age of 18 (the youngest age at which you can legally borrow money) who haven’t yet applied for or obtained any loans or credit, but it also can affect older individuals who’ve never had credit in their own names and recent immigrants of all ages.

The downside of having no credit score

  • Difficulty getting credit: The main reason credit scores and reports exist is so financial institutions, credit card issuers and other lenders can gauge the likelihood you’ll repay your debts as agreed. Being credit invisible can make it difficult to get loans and credit cards.
  • Issues with housing rentals: Many landlords and property management companies check credit scores as part of their tenant-screening processes. The lack of a credit score isn’t grounds for denying you housing, but if there are multiple applicants for the same unit, it’s possible that someone with a strong credit score will be chosen over an applicant with no score. 
  • Higher security deposits: Housing isn’t the only realm in which lack of a credit score can result in higher deposit requirements. Cellphone carriers who let you pay off a new phone in installments and cable and internet providers who lease equipment may check your credit and charge you higher security deposits if you’re credit invisible.
  • Car-rental challenges: Car rental companies typically require you to present a credit card when you pick up your vehicle. If you use a debit card, the car-rental company may check your credit score before agreeing to give you a vehicle. If you have no credit score, you might not be able to rent a car at all.
  • Employment concerns: Employers, especially when hiring for jobs with financial responsibilities, may check a special version of your credit report to gauge your ability to handle money responsibly. Employer credit checks don’t include credit scores, but the hiring company won’t be able to complete this step if you’re credit invisible and you could lose out to another applicant with a proven credit track record.

For more information about how you can establish and build your credit, see the following articles: