by Lyle Daly | July 30, 2019
Zero credit history is a common issue for young adults, immigrants, and anyone else who has never used a credit card or borrowed money in the United States. In fact, there are 26 million Americans who are considered credit invisible because they haven't established any credit.
Some people mistakenly believe that it's only a bad credit history that's problematic, but the truth is that having no credit history could end up costing you in several ways.
Consumers who are credit invisible often get their first wake-up call when they go apartment shopping. A credit check is standard before you can rent a home, and many landlords will automatically deny any applicant with no credit history.
There are landlords out there who will accept you despite having no credit, but it's almost guaranteed that they'll charge you more. This could be in the form of a much higher deposit -- for example, if the deposit for good credit borrowers is equivalent to one month's rent, you may need to pay the equivalent of two months' rent. Or they could expect you to pay multiple months of rent upfront.
Your state's rental laws will determine how much landlords can charge for a deposit and for prepaid rent, so make sure you check those to avoid getting overcharged.
The challenges don't end when you find a place to live. You'll also need to set up accounts with utilities providers. Depending on which bills you're responsible for paying, these utilities could include:
It's likely that each provider will run a credit check, and they could require that you pay a deposit. You can't exactly go without these services, so your only option is to pay up.
When your credit file is a blank slate, you won't be able to take advantage of these opportunities. To open a credit card with no credit history, you may end up needing to pay a deposit of $200 or more to get a secured credit card.
Even if you're not planning to borrow money anytime soon, there's always the possibility that an emergency could put you in need of some extra cash. Unfortunately, if you ever need to get a loan with no credit, you'll be in for a tough time.
There are plenty of lenders out there who will loan you money, but good loan providers are another story. Most lenders who offer no-credit loans charge very high interest rates, so you'll end up paying a hefty premium.
Just like utilities providers, wireless carriers also check your credit if you want to get a plan or finance a phone through them. Some will charge a deposit to consumers with no credit, although this will depend on the carrier. You can, however, get around this by opting for a prepaid plan.
If you want one of the latest, most expensive smartphones, you could be stuck paying for that out of pocket, as you typically need at least some credit history to qualify for a financing plan.
As you can see, being credit invisible can make your life much more expensive. Even if having no credit history isn't a problem now, it could be in the future, and you don't want to wait until then to do something about it.
All you need to get started is a credit card, which you can get with a cosigner or by paying a deposit for a secured card. Then, you just need to use it at least once per month, pay the bill in full on time, and you'll start to establish a good credit history.
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.
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