The most infuriating aspect of credit is the chicken-and-egg situation that arises when attempting to establish it: When you don't have a history of utilizing credit, nobody will want to provide you credit since you're a risk. But just because you've never had credit and don't have a credit score doesn't always indicate that you have a score of 0 for your credit. You do not have a score; hence, it is said that you are "credit invisible."

Why You Don't Have A Credit Score

No one can have a credit score of 0, regardless of how poorly they have previously managed their credit or financial obligations. The FICO and VantageScore, credit scoring models employ a scale that goes from 300 up to 850 points. As of April 2021, a FICO 8 score of less than 500 was held by just 3% of all customers. According to Tommy Lee, the principal scientist at FICO, scores exceeding 300 are "very rare." There are a few possible explanations for why you do not have a score:

• You have never had your name associated with a credit account.
• You haven't purchased on credit in at least half a year.
• You have not long ago applied for credit or been joined as an account user.

What's The Starting Point For Your Score?

If you are new to credit, this does not imply that you start at zero; it does not mean that you start at the bottom of the scale at 300. After all, you can't mess up your credit score for the first time if you've never had credit. If you do not have a credit history, the credit bureaus simply do not know enough about you to make an educated estimate as to whether or not you would repay the money that you borrow.

A credit score is nothing more than an estimate of the chance that you will pay back the next credit you are awarded, and it is derived from the information included in your credit reports. Credit scores may be determined after you start making use of credit. You probably won't begin with an excellent credit score, but neither will you be at the bottom of the spectrum.

How to Get Credit In The First Place

You should apply for credit to introduce yourself to the credit bureaus and begin building a credit history. The following are two examples of goods that have been developed with the express purpose of assisting in the process of establishing or improving credit:

• Credit cards with a security deposit. The name of these credit cards gives away the fact that they are backed by cash. In most cases, the credit limit is equal to the deposit.
• Building-your-credit loans. These loans will not be disbursed until you have paid all the required installments. They may be useful for establishing a track record of on-time payments and amassing a modest emergency fund at the conclusion of a loan term.

Use the website AnnualCreditReport.com to submit a request for a free credit report from each of the three credit reporting agencies before you submit your application. It's a warning sign if you've never had credit before, but you do have a file on file: It's possible that your information got mixed up with that of another person or that someone is exploiting your identity to seek credit in their name. Objecting to mistakes on your credit report is the only way to have them fixed. Follow these fundamental guidelines after you have been approved for your initial lines of credit:

• Always pay your payments on time, with no exceptions. Your payment history has the greatest impact on your credit ratings.
• Be sure you don't exceed your limit by more than a little bit. Maintain your balances at least 30 percent of your credit limit; the lower you keep them, the better.
• Try to have a variety of account kinds, including fixed-rate loans with regular payments, such as a vehicle loan, and revolving debt, such as credit cards. This will help you better manage your finances.

If you follow these methods, you can quickly add positive information to your credit reports. You will also have built up a credit score, allowing you to receive better interest rates and access to better credit products, such as an unsecured credit card or a credit card that gives incentives.

Don't Focus Too Much On The Numbers

You know what credit professionals' opinions are about credit scores, right? Do not get too preoccupied with the figures. Your credit score is recalculated whenever someone asks for it, regardless of whether the request came 10 minutes or ten months after the last time someone asked. It considers the most current information added to your credit reports during the recalculation.

According to Rod Griffin, you should instead concentrate on the "general risk" category associated with your account. While any lending institution is free to establish its requirements, the following is a common range for credit scores:

• 300-629: Bad credit.
• 630-689: Fair credit.
• 690-719: Good credit.
• 720 and up: Excellent credit.