What to do when you don’t have a credit score

How to buy or build a home if you don’t have a credit score?

Not having a credit score is more common than you might think, but it is important to fix this up if you’re planning on buying a home. We can help. Find out how.

One of the first steps in preparing to buy a new home is to make sure your credit score is up to scratch. 

If you’ve never requested a credit report and you don’t have much of a history with credit, you may not have a credit score. While this is more common than you might think, you should still take steps to fix this if you’re thinking about buying a home. 

This little number acts as an indicator of your ability to repay your debts. It can not only help determine your chances, but also the size of the loan the lenders will be willing to give you. 

What it means to have no credit score

While it is possible to get through life without a credit score, not having one might make a few things just a little bit more difficult. This includes common process such as: 

Getting a mobile phone

Many phone providers will look at your credit history and score to determine if you’re eligible for a postpaid contract. Since they are giving you the phone upfront, they want to be sure you’ll be able to make timely and consistent payments. If you don’t have a credit score, you may not be eligble. 

Securing utility accounts such as electricity and internet service

Signing up for utility accounts at a new property can be tricky without a credit score. Some service providers may not offer you their best rates or service plans, while others may deny service all together. 

Applying for a mortgage

If you’re thinking about buying a house, this one stings the most. All mortgage lenders use credit scores to help determine your eligibility for a home loan. If you don’t have one, securing a loan becomes much more difficult. 

Common reasons why you don’t have a credit score

There are a couple of reasons why you may not have a credit score, the most common being you don’t have any history with credit. Have you ever: 

  • Applied for a credit card
  • Applied for a loan
  • Held a utility account in your name
  • Had a mobile phone account

All of these are ways to create a credit history. The information on your credit limits, history of payments and any defaults all contribute to your history. It is used to determine your score. If you don’t have any experience with any of these, chances are you don’t have a credit score. 

If you did have a credit card, loan, utility account or mobile phone, but you don’t have a credit score, there are a couple of reasons why:

  • Your accounts have been inactive for too long. You must have an active account within the last six months to establish a credit history. If your accounts are still open, use them to help reestablish your credit history.  
  • Your account holders haven’t reported your accounts with a credit bureau. Contact your account holders and request they report this information to a credit reporting bureau such as Experian or Equifax.

How to develop your credit history

If you find out that you don’t have a credit score, there are a few simple steps you can take to get started building up your credit history. Keep in mind that it may take quite some time to build up your score, but your persistence will pay off. 

Apply for a credit card

Do your research to find a low balance credit card. Remember to keep an eye on annual fees and interest rates. Use your card responsibly and make payments on time. Not only will this help you avoid racking up unnecessary debt, it will also help ensure a clean credit history and better credit score. 

Apply for a personal overdraft

If you’re not comfortable taking out a credit card, you may want to consider a personal overdraft on your bank accounts. This is a line of credit on your bank account that allows you to overdraw your account by a set amount. 

Discuss your options with your bank and make sure you fully understand any associated interest and fees. If you do overdraw your account, make sure you pay your debts off quickly and consistently to build up good credit history. 

Put utility accounts in your name

If you’re living with someone who has all of the household utility accounts in their name, check with them to see if you can switch one or two over to your name. Not only will this help you establish a credit history, consistent payments in full and on time can be used to demonstrate that you are reliable when it comes to paying off your debts.