A credit score is an important part of being a financially responsible adult. If you've never made any credit before in your life, it means that you start with a clean slate – but it can also mean that certain types of credit (like a personal or home loan) can be harder to get.
Here are a few practical tips for what to do if you've just checked your credit score and found it ranking low as someone who has never made credit.
What gives me a zero credit score?
We know that good financial decisions and steps increase our credit score: But what happens if you don't have a credit score?
A credit score can be “blank” if you have never had any credit in the form of a loan, credit card, or store account before.
This is common for anyone who is freshly out of school or university and no longer dependant on the finances of their parents. This is also common for anyone who has been financially responsible on anyone else (like their partner) for years without the need or ability to build a credit score of their own during this time.
If you don't have a credit score, financial providers are unable to see how you have paid credit back because you have never had any to your name.
While it's said that “no credit is good”, having no credit can be an obstacle if credit is what you are trying to apply for.
How can having a zero credit score affect me?
If you don't have a credit score because you have never had any credit, it could mean that:
- Loan providers might refuse personal loans, vehicle loans, business loans or home loans every time you have applied for one because there's no financial background of repayment for them to judge your financial history by.
- Loan providers might offer you very small amounts (e.g., R100 to R500) as a first-time loan as a result of your lower credit score.
- Having your credit score at zero can make it difficult for anyone who checks to establish whether you have a good financial history: This can overall affect how you qualify for loans and how much you qualify to borrow.
How can I build a credit score when I don't have one?
If you've never had a credit score check performed and you're starting at zero, a reputable loan provider or your bank might be able to help.
- See your personal online banking profile, available through your bank's online banking portal, to see if there are any minor loans or financial products that you might qualify for.
- The first step to getting a credit score increased from zero is to take out a small loan and pay this back in the stated time. From there, you might qualify for more based on the first activity shown on your credit score. This should never be irresponsible credit just for the sake of it, but a step in the right direction to being more responsible with your money.
- Get life insurance. Even though it's not credit, life insurance means that you are seen as a far more responsible financial adult than someone who does not have the same insurance.
- Save money: Having untouched money in your savings account is something picked up by your bank as a positive – and making sure that your bank balance never drops into a negative balance even though it's not always easy to do is a huge benefit to your credit score.