Can You Survive Without a Credit Score?

Getty Images

Is living without a credit score possible? Forty-five million Americans, or 20 percent of the population, are doing just that, according to the Consumer Financial Protection Bureau.

The consumers in this group are considered either “credit invisible,” meaning they have no credit history with any of the three nationwide credit reporting agencies, Equifax, Transunion, Experian, or “unscorable,” meaning their credit history has little or no recent activity.

But how do they get by when it seems a credit score is needed to do just about everything?

What It Means to Have No Credit

Having no credit score is not to be confused with having a low credit score or bad credit. And it doesn't always mean a consumer has no credit history.

The Fair Isaac Corporation, which produces the FICO Score, states that for a score to be generated, your credit report must have “at least one account opened for six months or more, and at least one account that has been reported to the credit bureau within the past six months.” So it is possible for a consumer to have a credit history but no credit score, as would be the case for consumers who pay off their debt and close their accounts.

(It should be noted that a consumer could have no FICO Score—which is the most often used credit scoring model—but may have a VantageScore or other alternative scores.)

Should you have no credit score as a result of a slim or non-existent credit history, or if you are considering closing your accounts after paying down debt, know that life without a credit score is possible—but it isn’t always easy.

Here are some instances in which not having a credit score may pose a challenge.

Renting an Apartment

Leasing an apartment with no credit score may require a little legwork on your part to find a landlord that will work with you. Large management companies typically process a significant number of applications across multiple properties and tend to rely heavily on FICO Scores.

On the other hand, if you are renting from a smaller company or an individual, they may be more flexible in their requirement of a credit score. Preemptively telling a potential landlord you do not have a credit score before they check should increase your chances of their leniency.

Looking for Employment

You may have heard that prospective employers can check your credit. Unless you work in one of the 11 states that bans pre-employment credit checks, that is true—with your authorization, a potential employer may check your credit during the job application process.

But it is the information in your credit report that you are granting them access to, not your credit scores. The absence of a credit score will not affect hiring decisions.

Securing Car Insurance

Car insurance companies do consider credit history during the underwriting process. However, they use a specific credit-based insurance score that is derived from the information in your credit report, not your actual credit score.

According to Progressive, “An insurance score is a score calculated from information on your credit report...we develop our method by analyzing the following data from people we have insured: accident and insurance claim history; credit report information.”

Your credit score is not a factor in securing car insurance, while your credit history is.

Getting a Cell Phone and Establishing Utility Accounts

Some cell phone and utility providers check your credit when extending service to you. But they differ in how they evaluate the absence of a score.

Some service providers simply omit that factor from their decisions, while others may not extend their best rates or service plans to you or will require a deposit.

Applying for a Mortgage

Financing a home purchase without a credit score will require some effort but is doable.

The mortgage underwriting process is detailed and rigorous, and as a result, most lenders put a lot of weight on credit scores to evaluate your creditworthiness.

However, some mortgage issuers will do manual underwriting where they evaluate your file without a credit score.

Typically, you will need to provide proof of an extended on-time payment history for your non-credit accounts like rent, phone, utilities, and other monthly bills.

You are less likely to find a big bank willing to underwrite a mortgage without a credit score, but you do have options among smaller lenders, online lenders, local banks, and credit unions.

Life Without a Credit Score

It is possible to survive without a credit score. However, we do live in a credit-driven world, which will make getting on without a score difficult at times. Impossible? No. Challenging? Yes.

It’s important to know what lies ahead of you should you choose not to have a credit score and to decide if that is the right path for you.