How to Generate Credit Score If I Don't Have Any Credit History?

Credit scores are calculated with the help of some algorithms or statistical methods that use your credit history’s information to assign you this three-digit score. If you have an insufficient credit history, the algorithm or statistical method being used will not have sufficient data.

This thread will provide you with further information as to why you may not have a credit score, why you should have one, and ways to establish some credit. So, read on to find out!

Here’s Why You May Not Have a Credit Score

There can be various reasons as to why you might not be having enough credit history in order to generate a credit score, some of them are:

1. You Have Not Used Traditional Credit Accounts

Your credit history starts only when a creditor, for example, a loan lender or a credit card provider, goes ahead and reports the record of an account being opened by you to the major credit bureaus. Without any kind of record under your name, a credit score can’t be generated as there is a lack of past behavior that helps determine your creditworthiness. If you are someone who uses debit cards or cash and does not have any credit, you might be having nothing in your credit history and lacking such a score.

2. You Haven’t Used Credit in The Last 24 Months At Least

Once you have gone ahead and opened some sort of credit account, it is important for you to use it every now and then so that the algorithms or the statistical methods can analyze how you handle your credit. If you are holding credit but have not used it in at least 24 months, the data required to pull up a credit score is missing in your credit history. You should always keep in mind that the past payment history is one of the most essential factors used in calculating your three-digit credit score, along with the importance played by the use of credit score. Your score improves with on-time payments.

3. You Are Young and Don’t Have Credit Experience

Many of the young population out there do not have credit and might not have an idea of where to begin either. Since the credit history starts only when the lender reports a new account, the key to stay on top of your score is to start early. To begin with, you can consider applying for a credit card and using this only for your essential places. However, it is important to ensure timely payment of your bills, as your payment history is one of the most important factors that come in play while evaluating your credit score.

4. You Have Recently Applied For the First Time For Credit

If you are new to this area and you have recently applied for any sort of credit, it may require you to give it some time before you can actually see a credit score. Since these scores are based on your past debt management, many times you would be required to make numerous payments or have your fresh account be opened for a period of time before you can actually see your score.

Why Should You Have a Credit Score?

These three-digit scores are quite an important factor in your financial health. If you hold a good credit score, you are offered improved access to loans and better terms for borrowing and better rates of interest.

Obtaining new credit depends on your creditor going through your past financial behavior in order to decide whether or not to approve your loan. So a good credit score can help you get approved with better terms and interest rates. People having a good score can also review various lenders to apply for loans in Dubai.

How Can You Establish Credit

The bright side of all remains that there are several ways by which you can build credit, and thereby a credit score if you have never had any experience with credit. Some of the ways are:

1. Apply for a Retail Store Credit Card

In many cases, the first card that one applies for is a retail store credit card, typically because these cards are easier to qualify for and also provide lower credit limits. Such cards also allow the cardholder to enjoy discounts on the purchases made at that particular retailer. If you are someone who does not have any such credit history, these cards can be a possible option. However, they also come with some cons such as higher rates of interest and other fees and charges.

2. Opt for a Cosigner Credit Card

You can also go ahead and opt for a credit card with a cosigner that has a strong payment history. This can be an ideal option if you are a student who is just stepping in and can opt for this option with your parents. However, the cosigner on your card should be aware that if you end up missing a payment or carrying balances, their credit score is going to be affected too.

3. Become an Authorized User on Someone’s Credit Card

Another good option is to become an authorized user of an already open account. It could be your parent, spouse, or any other relative, or even your close friend. The person can add you to their credit card account and you will be allotted a separate credit card. Your credit history will build up as per the usage of that particular card, but the primary cardholder is responsible to pay off the charges. If you consider this option, it is good to lay out some rules with the primary cardholder for the usage of the card.

The Bottom Line

We hope we were able to clear up your mind as to why you are unable to generate a credit score. However, if you do not have a credit score, and you do not wish to build a credit history with the above-mentioned ways, you can go ahead and look for providers in the UAE that offer you credit or Loans in uae without the use of credit score.