What it Means to Have No Credit

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Having credit is a big deal for adults. If you want to get a credit card or get a loan you need to have at least fair credit – excellent credit is best. But, there’s a segment of the population that doesn’t have credit at all. In 2013, Experian estimated that 64 million people don’t have a credit score because they lack a credit history.

Credit is the ability to get goods or services before you’ve paid for them with the promise to pay for them in the future.

If you no credit, that means you don’t have an established history of borrowing money and paying it back on time.

What Having No Credit Says About You

It is perfectly normal for young adults to have no credit. Unless your parents made you an authorized user or joint account holder at some point when you were younger, you won’t have anything on your credit history and therefore, you won’t have any credit.

Your credit standing - whether you have good credit, no credit, or bad credit - isn't an indicator of your economic standing or financial health. You can be a high wage earner and still have no credit, especially if you always pay in cash and you’ve never had a credit card, loan, or past due bill. You can also have a low income with a high credit score, if you always pay your bills on time and manage your credit well.

No Credit vs. Bad Credit

Having no credit isn’t the same as having bad credit.

When you have bad credit, it means that you’ve borrowed money before and you haven’t paid it back as agreed. Because of that, banks will be hesitant to give you a credit card or loan. When you have no credit, you’re almost just as risky, because banks don’t know whether you’re going to pay back your loan on time.

Banks want to be sure they’re extending credit to someone who is certainly going to pay them back on time.

If you’re applying for a credit card, loan, or another service that requires a credit check, you may be denied. Or, for some services, you can get approved, but you’ll may have to pay a security deposit or maybe even a cosigner.

How to Establish Your Credit

The good news is that with no credit you’re a little more likely to get approved for credit than someone with bad credit, but it can still be tough. If you’re under age 21, you’re required to have your own income or a cosigner to get approved for a credit card.

You can start building your credit without a credit card, but that will be mean you need to take out a loan. If you have student loans that you’ve started repaying or will start paying soon, these can help you start building a credit history. You can also ask a parent to add you as an authorized user to one of their credit cards. The account history can help you qualify for credit on your own.