3 min read

what is my credit score if I have no credit history

Written By

Clay Shiffman

Your credit history is an important piece of your overall financial identity. It's a detailed record of your debts and repayment history. Your credit history report includes the number of types of credit accounts you have, the length of each account, amounts available and owed repayment records, and recent inquiries.

Financial institutions, creditors, and lenders report your financial activities to the credit bureaus, giving you a three-digit credit score based on your credit history. A strong credit history opens many doors in the financial world, helping you secure good interest rates and payment plans on credit accounts. As you reach different life stages, your credit history helps you finance your goals and reach various milestones.

Learn about your credit history, how it impacts your credit score, and everything you need to know about building a strong credit history.

What is your credit history?

Your credit history is ongoing documentation of your debts and debt repayments. It includes any credit cards, lines of credit, personal loans, mortgages, home equity loans, auto loans, and more. Financial institutions report the types of credit accounts you have, your payment history, and credit activities to major credit bureaus. Your credit report can also include information about past bankruptcies, liens, collections, and judgments.

These credit bureaus assess your data and give you a credit score to indicate your financial well-being. Lenders, creditors, and other financial institutions access your credit report whenever you want to apply for a new credit account. Since there's always a risk you default on loan payments, financial institutions use your credit history to assess whether to approve your credit application. They also use this information to determine what your credit limit should be.

What does ‘no credit history' mean?

Not everyone has a credit history. If you've never opened a credit account before, you have no credit history, as there's no financial data to report or score you on. Without a credit history, it can be difficult for financial institutions to approve you for certain products as they have no information to assess your riskiness as a borrower.

Start building your credit history sooner rather than later so you can increase your credit length and display good financial behaviour.

Where does your credit score start?

You don't automatically get a credit score once you become a certain age. Your credit history starts when you apply for your first credit account, such as a credit card. The creditor or lender reports your credit and payment activities to the credit bureaus, and the credit bureaus take this information to give you a credit score. It typically takes three to six months to get your first credit score.

It's good to start building credit early, as it takes time to get a good or excellent credit score. Lenders and creditors also want to see you can continuously manage your credit responsibly and pay bills on time. The longer you have your credit history and work towards a good credit score, the more likely lenders, creditors, and other financial institutions will give you financing in the future.

How long FICO® and VantageScore® take to give you a credit score

A VantageScore® can be calculated within a month of an account appearing on your credit report, but a FICO® score can take up to six months.

Credit scores are calculated by looking at debt repayments, credit utilization, amounts owed, and other remarks on your account. After you receive your first credit score, you can receive regular updates about your score to keep track of your financial health.

Your credit score can change monthly based on your account activity. Late or missed payments typically lower your score, while on-time payments and low credit utilization rates can increase your credit score. Some information on credit reports stays for up to seven years, like collections, liens, and bankruptcies.

What is a good credit score?

A good credit score ranges from 660 to 724, and an excellent score is anything above 760. You get a good credit score by consistently paying your bills on time and not carrying large amounts of debt. Financial institutions recommend having a credit utilization ratio of 30% or lower.

Other factors that contribute to a good credit score include not having too many credit accounts, having a diversified credit mix, and having a longer credit history.

Lenders and creditors want to see if you can use credit responsibly and show consistency with your payment history. With a good credit history and score, it's easier to qualify for financing at lower interest rates and better repayment terms. You can get a free credit score report periodically to monitor how you're doing and correct any errors immediately.

What is a bad credit score?

A bad credit score can refer to anything below 660. If you frequently miss payments and carry an outstanding balance, your credit score drops, and you can fall into the bad credit category. Other factors that can result in a bad credit score include multiple new credit applications in a short time, excessive credit card usage, and major debt issues like bankruptcies or collections.

Bad credit scores can be tricky to get out of, especially because some of this information stays on your report for a long time. For example, creditors and lenders can see past bankruptcies on your credit report for six years after you've been discharged. Poor credit can cause difficulties in getting loans, like an auto or a student loan, and qualifying for lower interest rates.

How to check your credit history for free

While you can pay for a credit report at any of the three major credit bureaus, most financial institutions offer a free credit report as well. It's a good idea to check your credit score every few months to see whether your score is progressing in the right direction and how you can improve your credit score. You can get alerts for any concerns or updates related to your credit score, such as when your score drops or when there's a new credit account added.

Reviewing your credit history ensures you stay informed on your personal and financial information. You should dispute any concerns immediately and correct inaccurate information to ensure they don't hurt your score.

How having no credit history affects your score

If you don't have a credit history, there's no information reported to the credit bureaus about your credit and financial activities. Therefore, you won't have a credit score as credit bureaus don't have any data about you. This is the case if you've never borrowed money before, such as opening a credit card account or taking out a personal loan.

Without a credit history, it's hard to qualify for loans and financing options, as financial institutions can't assess your risk level as a borrower. Establishing credit as soon as you can helps credit reporting agencies gather as much information on you and give a comprehensive credit report that reflects your overall financial well-being. The stronger the credit report reflects good financial behaviour, the more options you have.

How to build credit with no credit history

To understand how you start building credit, it's important to understand what affects credit scores in Canada. Your credit score consists of many components, like your payment history, credit history, amounts owed, previous collections and bankruptcies, total number and types of credit accounts, and total credit limits. It takes time to build credit, but with the right financial management skills, you can work your way towards a good credit score.

Become an authorized user

Most credit card companies allow authorized users, which is someone who has been added to another person's credit card account. As an authorized user, you can use their credit card when making purchases at retail shops or online but aren't responsible for paying the debt. You can piggyback on someone else's good credit history and start building some credit for your records. As long as the primary cardholder manages their card responsibly, their good credit history reflects on yours.

Get a secured credit card

Without a credit history, financial institutions may not qualify you for many credit cards. Secured credit cards have lower requirements, as your debt is backed by a cash deposit. The cash deposit you add typically becomes the credit limit of the card. Credit card companies can seize the cash deposit if you default on payments. Getting a secured credit card is a great way to learn healthy credit management skills and build credit.

Report rent and utility payments

While rent and utility payments aren't automatically recorded in your credit history, you can ask these companies to report your payment history to the credit bureaus. There are services, like Experian Boost, that let you report payments for streaming services, rent, phone bills, and utilities. If you don't plan on opening any credit accounts right now, this is a great way to help you build credit quickly.

Get a store credit card

Many stores partner with credit card companies to offer credit cards that are available at the issuing store and its partners. While you're limited to where you can use these cards, they're typically easier to get approved than a traditional credit card. Some store credit cards also offer rewards and loyalty programs when you shop with them or at their partner stores.

What is the fastest way to build your credit history?

Whether you're starting from zero or want to improve, here are some manageable ways to work on your credit history.

Get a personal loan

A personal loan helps build credit because it adds to your credit mix and establishes a unique payment history. Creditors and lenders like to see you can responsibly manage different types of debt. You get approval for a specific limit and can use the borrowed funds for any purpose.

A personal loan can be good for debt consolidation, funding your education, travel, home improvements, and other situations. It can also reduce your credit utilization instead of relying on revolving credit like a line of credit or a credit card.

Pay your bills on time

Payment history is one of the biggest factors influencing your credit score. It's important to pay outstanding balances on time to help increase your credit score. If you have a lot of late or missed payments, it can signal credit management and debt payment troubles, which is a concern for creditors and lenders. On-time payments also prevent you from having to pay expensive interest charges.

Grow your credit history

The longer your credit history, the more options you have when qualifying for financing. Even if you no longer use a credit account, it's a good idea to keep these accounts open. Otherwise, your credit history will shorten, and your score may drop. You can also add a variety of credit accounts, like loans, credit cards, and lines of credit. As long as you use your accounts responsibly, pay off any outstanding balances, and don't open too many at once, a more diverse and lengthy credit portfolio makes your credit report stronger.

Start building your credit today with KOHO

It takes time to build a good credit score and a strong credit history because credit bureaus like consistency. The earlier you start, the more time you have to prove to lenders and creditors you are a responsible borrower.

You have several ways to build your credit history. You can use a virtual credit card or a line of credit to start your credit journey. You get tips from professionals to gain insights into your personal finance situation and how you can better manage your credit to your advantage.

If you're struggling with timely payments or go over your credit limit, overdraft protection coverage gives you up to $250 zero-interest cash advance so you can avoid expensive penalty fees. All you have to do is apply for Cover and repay the cash advance.

Ready to build your credit with KOHO? Learn more about the ways you can get rewarded, earn interest, and make the most of your finances.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!