The reasons why you might not have a credit score

Being told you don’t have a credit score can be frustrating. However, you shouldn’t let this concern you. It's actually the perfect opportunity to build a great credit history from scratch.

Being aware of the two main reasons why you may not have a credit score will help you understand your financial situation better. You can then take steps to improve your score so that you can qualify for any credit you apply for.

First things first, here’s a quick recap of credit reports and scores:

Your credit score is assigned to you based on your credit report, and it will vary depending on the credit bureau you choose to work through. For example, some have a maximum score of 1,000 while others have a ceiling of 740. However, as a rule of thumb, you should aim for the highest score they offer. This will make you more attractive as a borrower to banks and other lenders.

At the same time, a high credit score isn’t a guarantee that you’ll be approved for credit. Lenders look at your credit report, as well as the information on your application form, such as your employment status and monthly income. Many also have their own additional criteria.

If you don’t have a credit score, it’s usually because you don’t have a credit history or your credit history is too old. Let’s have a more detailed look at each:

1. You don’t have a history of using credit

It may sound obvious, but in order to have a credit score, you must have a credit report. And to have a credit report, you must have a history of using credit.

Your credit history starts when lenders report information about you to one of the local credit bureaus, such as Experian or TransUnion. If you’ve never used credit in South Africa, you won’t have a history of using credit. This means that you won’t have a credit report and, therefore, no credit score.

If you don’t have a proper credit history, you probably fall into one of these three categories:

• You've never had a credit account in your name

You may not have a credit report or score because you simply haven’t used credit before. This could be because you’re still young, or perhaps you just haven’t needed credit before.

Even if you pay joint bills, it’s possible that your name doesn't feature on the account and, therefore, it doesn’t count towards your credit score. Similarly, if you have a mobile phone contract but it's not in your name, it won't show on your credit report.

• You’re under 18

Lenders are not allowed to extend credit to you if you’re under 18. In some rare cases, minors are added to their parent’s credit card accounts and they manage to build a rudimentary credit history. However, this is not the norm and the majority of minors won’t have this.

• You’re new to South Africa

Credit reports and scores cannot be transferred from one country to another. Even if you have an excellent credit score in another country, it won’t be applicable in South Africa.

When you move here, you will have to create a new credit report and score. This can take up to six months to generate, so it’s best to get started as soon as possible.

If you fall into any of these categories, your best course of action is to start building your credit history so that you can get a credit report, which will then produce a credit score.

2. Your credit history is too old

The second reason you might not have a credit score is essentially the opposite of the first. You’ve had South African credit accounts in the past, but too much time has passed since you last had one open.

When you close a credit account, its history remains on your credit report for six years. However, after this period, it will be removed from your credit report because it will be considered outdated. If you close all your credit accounts and don’t open any new ones, you may eventually “lose” your credit score. This often happens to South Africans who leave the country and settle down elsewhere.

If this sounds like you, you can check whether there’s still anything on your credit report by reaching out to the credit bureaus. Unfortunately, if nothing comes up, you’ll need to rebuild your credit history.