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Can no credit score be as damaging as a bad one?

Can no credit score be as damaging as a bad one?

Category: Credit cards

Updated: 12/10/2016
First Published: 12/10/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Debt is becoming an increasing problem for many, which is why those who have no credit commitments whatsoever often feel pretty smug about it. However, while it's admirable that they don't need to rely on credit, taking it to the extreme and having no credit score can actually be just as damaging as having a bad one.

Research from Amigo Loans suggests that 1.5m people have lived more than 45 years without borrowing anything at all from a bank or lender. These people won't have a credit score, which means their commendable restraint could one day prove to be a disadvantage, as they may struggle to secure a mortgage or even a phone contract.


Amigo Loans says there's a "common misconception" that opting to not use any form of credit makes you appear a more trustworthy borrower to a lender, when in fact, it does the exact opposite. With no credit history, lenders have no way of telling what kind of borrower you are, as you haven't proved that you're capable of making repayments – how will they know that you're likely to repay your debts if you have no history of doing so?

Quite simply, a credit score is used by a lender to determine whether they can trust you to pay back what you owe. No score, no trust. This is something that few people realise, with the research suggesting that 13m people are oblivious to the fact that it's more difficult to secure credit if you've never done it before.

Not only that, but only 12% of respondents have ever checked their credit score, which means many could be in for a shock when they're looking to apply for credit.

A credit score is for life

"It's so often that we hear customers ask why their bank wouldn't lend to them when they're so good with money," said Glen Crawford, CEO at Amigo Loans. "They've never had a credit card in their life, they'd say. However, as ironic as it sounds, if you've never used credit, it's often hard to access it.

"Many banks and lenders use credit scores as an indication of how likely you'd be to repay a debt, whether that be a £5,000 loan or a £5 overdraft. But, if like millions of credit virgins, you've never demonstrated that you can be trusted, they shut the door."

He added that this was an unfair situation as it leaves a lot of trustworthy people without access to finance such as a mortgage, but it's a fact nonetheless: if you want to be successful in your credit application, you need to have a decent credit score – and you need to nurture it to make sure it stays that way.

This means that, if you've never had credit before, it's time to get some! Start slowly and responsibly by applying for a small overdraft, for example, or even a credit card with a low credit limit. Those without a credit score may find they have to pay slightly higher interest rates than their more credit-experienced counterparts, but the key is to repay the balance in full every single month so interest isn't charged.

This in itself will show that you're responsible – putting a few purchases on a credit card each month (for example) and paying them off when the statement arrives will show that you are indeed trustworthy, and that will be enough to start building a positive credit score. Then all you have to do is keep on top of things by using a credit check provider to keep tabs on your score, and you can be confident that you're building up a decent credit rating that can stand you in good stead for future applications.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.