No Credit Score? You Still May Have Decent Credit

Tens of millions of Americans don’t have credit scores, meaning they have little or no access to things like credit cards, auto loans, personal loans and mortgages. People with poor credit are similarly limited, and there’s a good reason for that: Without a good credit history, you’ll have a hard time finding someone who will extend you credit. Sure, lenders consider other factors when evaluating potential borrowers, but a decent credit score gets your foot in the door.

Here’s the thing: Poor credit and no credit are completely different. Many credit scoring models exclude consumers who haven’t used credit in the past six months, so even if you once had a good credit history, inactivity will push you into credit score limbo. You’re unscorable, a credit invisible.

Research by VantageScore Solutions estimates there are 30 million to 35 million people who are not scored by “the most popular credit scoring models” — meaning FICO scores, which make up the vast majority of the credit scoring market. VantageScore Solutions is a joint venture of the three major credit reporting agencies — Equifax, Experian and TransUnion — that produces VantageScore, another scoring model lenders use to evaluate consumers.

With VantageScore 3.0 (the newest version), about 10 million of those unscorables would have credit scores of 600 or higher, the company found. A 600 on the VantageScore 3.0 range of 300 to 850 is by no means excellent credit, but it’s not bad. It’s certainly going to give you greater access to loans or credit cards you may want or need than having poor or no credit.

There are a lot of consumers who believe credit scoring formulas should include things like rent payments, payment histories on older but inactive loans, and utility bills. The reason so many consumers can be scored under VantageScore 3.0 is that this model considers two years of credit history, as opposed to six months. The alternative credit reporting agency eCredable is another example of these efforts. However, consumers rarely get the chance to choose which credit score a lender will use when making a decision about whether to extend credit.

The most effective path toward loan approval is to build credit in the conventional sense: Find your starting point (often a secured credit card), practice the fundamentals of good credit (make payments on time, keep your debt levels low) and be patient. You can get a free credit report summary, including your VantageScore 3.0, every 30 days on Credit.com to track your progress.