What Is Credit Invisible?

If you have no credit history — making you credit invisible or a “credit ghost” — then you may have a lot of trouble getting a mortgage, private student loan or credit card.

That’s because lenders generally use scores based on your credit report to decide whether you’re a risky borrower.

Millions of people are credit invisible, but the good news is that you can build credit by joining someone else’s account or using a secured loan or credit card.

Key takeaways

• Credit invisible means you don’t have any credit history, making it hard to get a loan or credit card.
• Being credit invisible can also cause problems getting housing or buying insurance.
• Ways to build a credit history include getting a secured credit card or joining a friend or family member’s account.

Credit invisible: What it means

If you have no credit history, then you are credit invisible, with nothing on your credit report and no credit score to use if you want to borrow money.

The most-used credit scores come from FICO or VantageScore and range from 300 to 850. If you’re credit invisible, a lender would have to use other methods to decide whether you’re creditworthy, and might not even consider your application at all.

In many cases, you will need a cosigner, and the rate you’re offered might not be great. Even something like renting an apartment can become much more difficult if you have no history with the major credit reporting bureaus (Experian, Equifax and TransUnion).

How being credit invisible affects you

Being a credit ghost has some of the same challenges as having bad credit. Here are some major roadblocks for credit-invisible borrowers:

You don’t have a credit score

Credit scores are calculated using the accounts listed in your credit report. Without that data, there’s no score. In order to get your first credit score, you’ll need to take out debt or open a line of credit.

It’s hard to get new credit

Without a credit score you’re less likely to be approved for credit cards, private student loans, mortgages or other credit accounts, and may find it tough to buy a car.

Even if you are approved for credit, you’ll probably need a cosigner and will likely see less favorable terms and higher interest rates.

It can be harder to find housing

Some landlords and rental agencies run credit checks on applicants. Without a credit history, they may deny you or else ask you to pay a higher deposit before you move in.

Buying a home can be even more challenging if you’re credit invisible. Mortgage lenders look carefully at an applicant’s credit background, and you may miss out on some loan programs, like mortgages through the Federal Housing Administration (FHA).

Buying insurance may be more expensive

In most of the U.S., home and auto insurance companies look at your credit score to decide how much you should pay.

This is the case in all states except California, Hawaii, Massachusetts and Michigan, while in some other states you can’t be denied insurance for being credit invisible (or having bad credit) but you will pay more than people with good credit.

How to stop being credit invisible

With all the problems that come with being credit invisible, it’s worth taking steps as soon as possible to build credit from scratch and stop being a credit ghost. Once an account appears on your credit history, you have a credit score within one to 6 months.

Become an authorized user on a friend or family member’s credit card

You don’t need to open your own credit card to start building credit. Instead, you can become an authorized credit card user on a friend’s or family member’s account.

When you’re added as an authorized user, any activity on that credit card, including payments, will appear on your credit record.

Just make sure that the primary card holder is responsible and pays their bills on time. Otherwise, you might start out with bad credit, which can be worse than no credit at all.

Get a credit-builder loan

A credit-builder loan is meant to help people with no credit or bad credit prove they can make regular, on-time payments.

Though it’s considered a loan, it operates a little differently: Instead of borrowing a lump sum amount, you first make a deposit for the amount of the loan — usually into a savings account or certificate of deposit.

After you’ve made the payments, the “lender” will release the loan funds. Although you’re not really borrowing money, it counts on your credit report.

Get a secured credit card

If you don’t have the credit to get a traditional credit card, consider opening a secured credit card.

Like with the credit-builder loan, you need to make payments first — in this case, you pay a refundable security deposit. The amount paid then becomes your credit limit.

If you don’t make your payments, the secured card issuer can use the deposit to cover what you owe.

Report bill payments

If you miss one of your monthly bills — phone, rent, etc. — and it’s sent to a collection agency, then it will likely end up on your report and hurt your credit score.

But in some cases, paying your monthly bills can help your credit score.

If you rent, ask your landlord or rental agency if they report payment history to the major credit reporting agencies. If not, look into reporting services like PayYourRent or RentTrack.

If you want to get credit for other monthly payments, like your utilities or internet services, consider looking into Experian Boost. It’s a free program that will let you “get credit” for monthly payments that aren’t usually reported, though you’ll need to provide personal data to join.