What's your credit score if you've never had a credit card?

Many of you have asked what your credit score is if you've never had a credit card or line of credit taken out under your name.  The FICO score range is 300-850, so if you've never had any type of credit, your score is in the 300's.  The best thing to do as soon as you turn 18 is to have a small credit card that you pay off every month so that you can start building your credit history.

Having no credit is worse than having poor credit.  Typically, those with poor credit are in the 500 credit score range.  People who have filed bankruptcy are in the low 500's range.  Those who have poor credit still qualify for high APR loans to balance out the risk, but people with no credit cannot get a loan without a co-signer.

If you don't have any credit, the best thing to do is start establishing it now.

The Effect of Bankruptcy on Your Credit Score

If you end up filing a Chapter 7 or Chapter 13 Bankruptcy, expect your credit score to dip at least 200 points.  All of your past open accounts will show that they're included in the bankruptcy, and you'll essentially have no liabilities.  In the case of a Chapter 7 Bankruptcy, all of your debt is eliminated after the sale of your assets.

Besides the dip in your credit score, the bankruptcy will show up as a public record on your credit report.  Even if you do build your credit score into the high 600's and low 700's 2-3 years after bankruptcy, which is totally doable, your bankruptcy will still be listed.  A Chapter 7 Bankruptcy will stay on your credit report for 10 years, and a Chapter 13 Bankruptcy will stay on your report for 7 years.  If they show up any longer than the stipulated time, you can appeal to the credit bureaus to have them removed.

However, years after these public records are removed from your report, creditors such as American Express keep records on those who have had their debts discharged via bankruptcy no matter how long ago it happened.

Why Care About Your Credit Score?

Most people can't afford to make the big purchases in life (i.e. house, car, or business) without looking to some sort of a loan or financing for help.  When applying for a loan, your credit score is able to give a quick assessment of how much risk you pose to the person or company lending you the money.

Your FICO Credit Score (median score between the Equifax, Transunion, and Experian scores) takes into account your past and present borrowing history including magnitude, payment history, and any public records such as a personal bankruptcy.  The higher your credit score, the less risk you pose to your lender, and the less your cost of borrowing will be.

Ultimately, you should take care of your credit score so that your cost of borrowing will be as low as possible given the amount of assets you own and income you make.  However, if you have plenty of cash, you can just buy anything you want with "straight cash homey."  After all, that's how Randy Moss rolls: