I don't have a credit score

Not every individual has a credit score. If you have never taken out a loan, credit card, or any other line of credit, you may not have a credit score at all. It can also happen if you are only a student yet and haven’t started earning.

But most lenders, banks, and credit providers require people to have a credit score and a good credit history in order to assess their creditworthiness.

The good news is that – you can always build and improve your score with the right steps.

So whether you are worried about ‘I don't have a credit history’ or “I don't have a credit score,’ there are tips that can help you build a steady credit history.

When you want to borrow credit in the form of a credit card or loan, lenders need some kind of assurance that you will pay your bills on time and not fall into a debt spiral. A good credit score helps give them this assurance.

Credit score is calculated to assess the creditworthiness of an individual and it is based on your credit history – including the money you have borrowed, all the credit applications you have applied for, and your repayment history in the past.

A credit score not only works as the key to getting approved for new financial products like loans and credit cards, but it can also help you get rental properties and even better employment opportunities.

Lenders, landlords, credit providers, and employers typically run a credit check before considering your application. If you don’t have a credit score, you may end up needing co-borrowers or co-signers just to be eligible for a new loan or renting out a new apartment.

Australia’s major credit bureaus like Experian, Equifax, and Illion gather information from lenders to create your credit report and then use their own credit scoring model to calculate your credit score.

The credit score is stored on your credit report. You can access your report for free to look through your credit inquiries and check your credit score.

If your credit score is absent or marked as zero, that means you haven’t had a credit score just yet.

To get a free copy of your credit report and check credit score, you can sign up on ClearScore and get your report emailed directly to you.

Without a credit history or credit score, banks would have to individually assess every borrower. Not only would that take more time, but it would also lead to you submitting numerous documents every time you need to apply for new credit.

Without an intimate knowledge of how you spend your money, a credit score and credit history are the next best thing. They give lenders an idea of the risk they are taking when they lend to you. Then, they can approve or deny your application based on that risk. ‍ Credit histories and scores are also important for other areas of your life, such as applying for car insurance or getting jobs in the financial sector. Landlords may also require you to have a suitable credit score before they rent to you.

The answer to ‘Do you need a credit score’ is yes, absolutely yes. But there can be instances when you don’t have a score at all:

You have never had a traditional credit account

Your credit history begins right when a creditor, like a lender or a credit card provider, updates the record of you opening a bank account or taking out a new line of credit. Without any kind of credit record against your name, there is no way for lenders to effectively assess your creditworthiness.

If you have a habit of using mostly cash and debit cards, and you don’t rely on a lot of credit, you may have no credit history at all along with no credit score.

Utility accounts like gas, electricity, phone, and internet are considered credit accounts and when you apply for these accounts, an inquiry is generated which gets recorded on your credit report as the provider runs a credit check.

If you have no utility accounts under your name or you have never taken out credit, you may have no credit score at all.

You have never made a credit inquiry

When you apply for credit, whether it's through a loan or credit card, a credit inquiry is generated and it gets recorded on your credit report. This is regardless of whether you get approved for the application or not. So, even if you haven’t successfully been approved for a credit application, you can still have a credit score based on the credit inquiries.

But if there haven’t been any credit inquiries at all, you might have no credit score.

You have never had a postpaid mobile

As mentioned above, getting utility bills under your name also generates credit inquiries on your credit file which can, in turn, affect your credit score. Postpaid mobile accounts are also a type of utility account that extend credit to you and you are expected to pay the bills at the end of every month.

If you have always had a prepaid plan, there are chances you may have no credit score.

Even if you don’t have a credit score yet, there are ways to build credit:

Go for a postpaid mobile plan

If you are still on a prepaid mobile plan, it's definitely worth switching to a postpaid mobile plan instead to steadily build your credit rating. You may be able to switch to more competitive prices as many cellular providers offer discounts to new users and you will also be able to develop your credit history on the way.

Get utility accounts in your name

Whether you live with your roommates or parents, it's always a good idea to get the household utility accounts under your name in order to build your steady credit history. In case you already have utility connections, you can get them transferred under your name to add them to your credit reports.

Apply for a low-cost credit card

Getting a low-cost or low interest credit card is one of the best ways to build credit score. You can add recurring monthly payments to your credit card and pay the bills together when the credit card is generated.

This way, you would be using the card regularly and in turn, building a positive credit history on your credit reports. Just make sure to always pay your credit card bills on time and never reach the credit limit available to you as that can have a negative impact on your credit scores.

In case you have been having problems getting approved for a credit card due to the absence of a credit score, you can also apply for credit cards with bad credit.

Apply for a small personal loan

You can also apply for a small personal loan or credit builder loan to get a new line of credit attached to your bank account and in turn, build your credit history. But just like a credit card, you have to make sure you are paying off your credit builder loan installments on time and never missing on any of the monthly payments. There are also no credit check loans available for individuals with low or no credit scores.‍

Diversify your debt

Your credit history and score are based on many factors, and one of the main factors is your credit mix.

Credit mix refers to the different types of credits that you use at a time. This can include personal loans, home loans, car loans, mortgages, and credit cards

When you have every type of credit in your mix, it keeps your score healthy.

Become an authorised user

In case you haven’t been able to get approved for a new credit, you can also ask your family members or spouse to add you as an authorised user on their credit card. This can in turn help you build credit with a credit card.

Though keep in mind that if you or the main owner of the credit card fails to pay the card bills on time, it can affect both of your scores negatively. Take a look at what happens if you don’t pay your credit card bills on time.

Even if you have no credit score at the moment, you can still steadily build your credit history in order to get a good credit rating on your file. Though remember to take positive steps to build your credit history or it can have a detrimental effect on your score and make it all the more difficult for you to get approved for credit applications.

With ClearScore, you can get free credit reports and check credit scores right away. Sign up to get started.