Never Used a Credit Card? Drawbacks of Not Having a Credit Score!
Not having a credit score isn’t always a terrible thing, but it’s not considered to be an ideal thing now considering how much this three-digit number has become important. Not having an Equifax credit score can make it difficult to qualify for loans and credit cards. Thus, it is suggested to start building your Experian credit score as soon as possible to prepare for the future.
What Does Having No Credit Score Mean?
Credit invisible is referred to those people who have no credit history. Credit invisibility is often caused by a lack of credit accounts or by not using credit for an extended period of time. There is no way to calculate an Equifax credit score if you have no credit history. Your credit reports document your borrowing and debt repayment history, and a credit score is calculated using information from one of your credit reports.
Drawbacks for having no credit score!
Essentially, banks provide credit to those who are responsible enough to repay it. Credit scores inform the lender about the risk they are taking by lending to you. Then, based on that risk, they can approve or decline your application. It is on the basis of your credit score, you can negotiate a credit score with the bank. Not having an Equifax credit score will cause you to face these risks:
Having trouble acquiring credit: The major reason credit scores and reports exist is so that financial institutions, credit card companies, and other lenders can assess your likelihood of repaying your bills on time. Hence, one can understand how being credit invisible will hamper their chances of getting loans and credit cards.
Higher security deposits: A lack of a credit score can result in higher deposit requirements. You will also be charged extra to compensate for the risk attached to your profile.
How Do You Create a Credit Score History From Scratch?
When you are just beginning to establish your credit history, it may be tough to establish credit. If you don’t have a credit history, it’s tough to get a loan or even a credit card. But how would you demonstrate a track record of regular repayments if no one will lend you money, to begin with? Here are a few pointers to get you started with creating your Equifax credit score history from scratch:
- Apply for a credit card: If you’re beginning from scratch, you’ll almost certainly need a credit card. By submitting your PAN card and recent income statement, you will be able to secure a credit card.
- Do not apply for multiple credit cards: Credit applications can cause a temporary drop in your Experian credit score. Multiple applications have the potential to significantly hurt the Equifax credit score you are attempting to create. If feasible, space your applications by six months, and do your homework before applying for the credit card. Applying for many credit cards at the same time will give the impression that you are desperate for credit to potential lenders or financial organizations.
- Make your EMI payments on time and in full: A late or missed credit card payment can have a negative impact on you. Set up auto-debit to ensure that all of your bills are paid on time. One of the most important factors influencing your Experian credit score is your payment history. Set up a system to notify you when your payments are due and to pay at least the minimum amount on time. Make certain that you pay all of your EMIs on time.
- Apply for a credit card after some time: Typically, credit bureaus require at least six months of steady credit card activity before issuing a credit report. Build a solid credit history for a year to ensure that credit card issuers will issue you a credit card.
How Long Does It Take to Get a Credit Score?
Establishing an Experian credit score can be time-consuming: Typically, the lender files your initial loan or credit card account to the national credit agencies within a few weeks, and you’ll have a credit report within a few weeks. Only once a credit report shows an account that has been active for at least six months and has received at least one payment during that time can it be utilized to establish an Equifax credit score.
A good credit score means that you have several advantages over people who do not have a credit score or have a poor credit score. If you have an excellent credit score, you are eligible for the following benefits:
Lower interest rates and more favourable terms on credit terms: One advantage of having a good credit score is that banks may offer you lower interest rate loans and credit cards.
Increase your chances of getting a credit card or a loan: Borrowers with excellent credit scores are deemed low-risk, which increases their chances of being approved for loans and credit cards.
Access to the top credit cards with the best rewards: A solid credit score also qualifies you for the most rewarding credit cards on the market, including those with the best cash back, travel points, and other perks.
Get your credit card approved for a larger credit limit: You can also get approval for a higher credit limit on your credit card if you have an excellent credit score. Because of your demonstrated creditworthiness, creditors are more willing to lend you additional money.
So we are saying,
Credit scores are used in so many ways these days that establishing credit reports and Experian credit score sooner rather than later may make daily activities much easier for many people. This also allows you to start developing your credit score, which will allow you to finance large purchases in the future. Obtaining a first credit card is the most difficult part of building a credit score history. Remember that it can take up to six months for your Equifax credit score to increase enough to allow you to qualify for loans. Don’t be disheartened if you don’t see immediate benefits. The reason for the delay is that information on new bank accounts or credit card payments can take a long time to reach the credit bureaus before being updated in your credit history.