Having credit is a big deal for adults. If you want to get a credit card or get a loan, you must have at least fair credit – excellent credit is best. But there is a segment of the population that has no credit at all. In 2013, Experian estimated that 64 million people have no credit score because they lack a credit history.
Credit is the ability to get goods or services before you have paid for them with the promise of paying for them in the future.
If you have no credit, that means you have no established history of borrowing and paying it back on time.
What Does No Credit Say About You
It is very normal for young adults to not have credit. Unless your parents made you an authorized user or joint account holder at some point when you were younger, you will have nothing on your credit history and therefore you will have no credit.
Your credit standing – whether you have good credit, no credit or bad credit – is not an indicator of your economic standing or financial health. You may be a high wage earner and not have credit yet, especially if you always pay cash and you have 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 Is not the same as having bad credit. If you have bad credit, it means you borrowed money and you didn't pay it back as agreed. For this reason, banks will be hesitant to give you a credit card or loan. If you don't have credit, you're almost as risky because banks don't know if you'll pay your loan back on time. Banks want to be sure they require credit To someone who is certainly paid them on time. If you apply for a credit card, loan or other service that requires a credit check, you may be denied.
Or for some services you may be approved, but you may have to pay a deposit or maybe even a cosigner.
How to establish your credit
The good news Is that without credit you are a little more likely to be approved for credit than someone with bad credit, but it can still be tough. If you are under 21, you must have your own income or cosigner to be approved for a credit card.
You can start building your credit without a credit card Means you have to take a loan. If you have student loans that you have started to repay or are starting to pay off soon, these can help you build a credit history. You can also ask a parent to add you as an authorized user on one of their credit cards. Account history can help you qualify for the loan yourself.