Does Everyone Have a Credit Score?

A credit score is a numerical representation of an individual’s creditworthiness, often a three-digit number, which many people encounter throughout their financial lives. This score helps lenders and other entities assess the risk associated with extending credit or services. A common question arises regarding whether every individual possesses such a score. The presence or absence of a credit score depends on an individual’s engagement with credit products and their payment behaviors as reported to credit bureaus.

Understanding What a Credit Score Is

A credit score is a three-digit number summarizing an individual’s credit risk. Lenders use it to evaluate the likelihood of a borrower repaying a loan on time, based on information in their credit report.

In the United States, FICO and VantageScore are the two main credit scoring models. Both assess credit behavior but use different methodologies. FICO scores, from Fair Isaac Corporation, are commonly used by lenders. VantageScore was developed by the three major credit bureaus—Equifax, Experian, and TransUnion.

Both FICO and VantageScore range from 300 to 850, with higher scores indicating lower credit risk. Factors include payment history, amounts owed, length of credit history, new credit, and credit mix. These scores help lenders make decisions.

Who Has a Credit Score (and Who Doesn’t)

An individual has a credit score when they have an active credit history. This means they have used credit products like credit cards, mortgages, or auto loans, and their payments have been reported to the three major credit bureaus: Experian, Equifax, and TransUnion. Sufficient activity generates a score.

Some individuals do not have a credit score, a state often called “credit invisible” or having a “thin file.” Young adults or recent immigrants may lack sufficient credit history. Individuals who primarily use cash or debit and avoid credit products will not establish the necessary history.

A limited number of credit accounts or inactive accounts can result in a “thin file,” making score production difficult. Errors can lead to a missing score, but the primary reason for credit invisibility is a lack of reported credit activity. The Consumer Financial Protection Bureau (CFPB) estimates that millions of U.S. consumers are credit invisible.

The Role of a Credit Score

Credit scores impact various financial aspects of an individual’s life, beyond lending. Lenders use these scores to determine eligibility for credit products like mortgages, auto loans, and credit cards. A higher score often leads to more favorable terms, including lower interest rates and higher credit limits.

Beyond loans, credit scores influence other financial opportunities. Landlords review credit scores for rental applications to assess tenant reliability. Insurance companies also use credit-based scores to determine policy rates. Utility providers check credit scores when establishing new service, sometimes requiring a security deposit for those with no or low scores.

Some employers may examine credit reports for positions involving financial responsibility. The score indicates financial management habits. The presence and quality of a credit score can impact access to services and financial products.

Establishing a Credit Score

Individuals without an established credit score can build credit. One approach involves secured credit cards, which require an upfront cash deposit that serves as the credit limit. This deposit minimizes issuer risk, making them accessible for new users. Responsible use, including on-time payments and low balances, is reported to credit bureaus, building positive payment history.

A credit-builder loan is another tool, often from credit unions or banks. Unlike traditional loans, the amount is held in a locked savings account or CD by the lender. Borrowers make regular payments over a set term, reported to credit bureaus. Once repaid, funds are released, building credit history and savings.

Becoming an authorized user on an individual’s credit card account can help build credit. The account’s payment history and credit limit may appear on the new user’s credit report, benefiting their score if the primary cardholder is responsible. The primary account holder must make on-time payments and manage credit utilization, as their activity impacts the authorized user’s credit file.

Some services allow for reporting regular rent and utility payments to credit bureaus. While most landlords and utility companies do not automatically report positive payment history, third-party services can facilitate this. These services enable on-time rent, cell phone, and utility payments to be added to credit reports, demonstrating responsibility. This can benefit those with limited traditional credit accounts.