Why Is My Credit Score Low When I Have No Credit Card? (2024)

FAQs

Why Is My Credit Score Low When I Have No Credit Card? ›

Your credit score could be low when you have no credit card because your credit report includes a missed payment from a loan or a debt in collections. Any derogatory mark on your credit report can cause a low score when you have limited credit history, which may be the case if you don't have a credit card.

Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.

Your borrowing history

If you've little or no experience with credit, even if you have a good income, your credit score may be low, simply because there's little to indicate how well you can manage borrowing and repayments.

Having no credit history

Your credit rating will also be affected if you've never taken out a credit card or any kind of loan. In these instances, the credit reference agencies have no information to go on when deciding whether you will pay off any money you borrow in a reliable and timely manner.

Things like new credit applications and missed payments may impact your credit score. You may be able to improve your credit score in a number of ways, including making sure you're on the electoral register, managing accounts well and limiting new credit applications.

It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.

Letting one of your oldest cards close due to inactivity can significantly curtail the length of your credit history, which has a negative effect on your credit score. Maintaining at least a small amount of activity on each of your cards helps keep them active and open.

You can also build credit simply by paying all your bills — including loans, rent, and utilities — on time. Doing this, you'll typically see an increase to your score after about six months, though the longer you pay on time, the more your score will grow. It may take several years to achieve a good or excellent score.

Keeping a zero balance is a sign that you're being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there's a good chance you'll see your credit score rise, as well.

The other risk of leaving a card inactive is the issuer might decide to close the account. If you haven't used a card for a long period, it generally will not hurt your credit score. However, if a lender notices your inactivity and decides to close the account, it can cause your score to slip.

Why is my credit score low when I pay on time? ›

A short credit history gives less to base a judgment on about how you manage your credit, and can cause your credit score to be lower. A combination of these and other issues can add up to high credit risk and poor credit scores even when all of your payments have been on time.

Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.

Having no credit history typically means you don't have a credit score at all. This is different from having a low credit score, which can stem from having limited credit history or negative reporting on your credit reports. If you have no credit history at all, building credit from scratch should be one of your goals.

Having no credit card debt isn't bad for your credit scores, but you do need to maintain open and active credit accounts to have the best scores.

It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.

Can you have a credit score without having a credit card? Yes, you can establish credit and have a credit score without a credit card. Credit card companies are not the only ones that report your payment and usage history to the three credit bureaus that report on your credit score, Experian™, TransUnion^® and Equifax^®.

Factors like limited income, debt from loans, unpaid bills, or limited credit history could also prevent you from qualifying for certain cards. Not being at least 18 years old will keep you from getting your own credit card account, too.

Having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.