What It Means to Have No Credit

House of credit cards under blue sky
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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. 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. Having "no credit" means you don’t have an established history of borrowing money and paying it back.

What Having No Credit Says About You

We aren't born with credit. In fact, you won't have a credit score at all until you've had at least one credit account within the past six months. Teenagers and young adults often have "no credit." Unless your parents made you an authorized user or joint account holder when you were younger, you won’t have a credit history, and therefore, you won’t have any credit.

It's possible to have bills that you pay every month and still not have a credit score. Not all companies you pay monthly report to the credit bureaus. For example, utility services, cell phone, and gym membership accounts aren't reported to the credit bureaus and won't help you build a good credit score.

Not having a credit score isn't necessarily a bad thing. Your credit score by itself--whether you have good credit, no credit, or bad credit--isn't an indicator of your economic standing or financial health. You can have a high salary 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.

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 can't view a credit history to predict 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.

When you have "no credit, you might find that you're denied for credit cards, loans and other services that require a credit check. You may be able to able to get approved for some services, but you'll have to pay a security deposit or even a cosigner.

How to Get Established

When you have no credit, you're more likely to have your applications approved than when you have bad credit, but it can still be tough. If you’re under age 21, you’re required to have your 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.