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.

Denied a Loan? Look to Your Credit and Income

A lender approves your loan based on the amount of risk you pose.  Your credit score is able to depict the amount of risk in a measurable number--the higher the score, the less risk you pose.  However, another component is how much money you have (assets) and how much money you make (income).

For example, if you have a high credit score (750 plus), but you only make $10 an hour part time and have $1000 in the bank, it's less than likely you'll be able to finance a car that costs more than $20,000.  To qualify, you'll need to put more money down or just end up getting a cheaper car.  The same concept holds true for home loans / mortgages.

Ultimately, it comes down to what you can afford AND your credit history.

Reader Question: Bankruptcy and the Future?

One of my readers asked how bankruptcy affects a married couple.  If a couple files for bankruptcy while married, both of their credit scores will be affected in the same way.  In a Chapter 13 Bankruptcy, they will be able to possibly keep their assets in a payment plan; but in a Chapter 7 Bankruptcy, they will have to let go of all their assets and start over.

If you are getting married and have filed for bankruptcy, it's best to hell your fiance beforehand.  As long as your partner has good credit, he or she can be the borrower, and you can be the co-signer on loans that you take out.  As long as your score is high, and both of your income levels are sufficient, it should not be too much of a problem; however, expect to get turned down from some lenders do the co-signer bankruptcy.  Alternatively, you could just have the loan in his or her name (not yours), and the only reason to put you on as a co-signer would be to get the extra income needed to qualify for the loan.