If you have a good credit score, you'll almost always qualify for the best interest rates, and you'll pay lower finance charges on credit card balances and loans. The less money you pay in interest, the faster you'll pay off the debt and the more money you have for other expenses.
If you have no credit, it means creditors don't have a good way to predict how likely you are to pay your bills as agreed. It's not the same as bad credit, which means you have a credit history with major blemishes. It's harder to move your score up to the good range when you start with bad credit.
Not using your credit card doesn't hurt your score. However, your issuer may eventually close the account due to inactivity, and that could affect your score by lowering your overall available credit. For this reason, it's important to not sign up for accounts you don't really need.
Your credit score
This helps lenders decide how likely you are to repay your debts and plays a significant role when securing a mortgage. Scores range from 300 – 850 points and are based on: Your payment history and ability to repay your debts on time. Late payments will lower your credit score.
Factors that contribute to a higher credit score include a history of on-time payments, low balances on your credit cards, a mix of different credit card and loan accounts, older credit accounts, and minimal inquiries for new credit.
LaToya Irby is an expert on credit cards, credit scores and monitoring, budgeting, and banking products and services. ... Generally, if your credit score is above 750, you're considered to have excellent credit. If you already have an excellent credit score, make sure you're getting the most out of it.
But if you have no credit history, you don't have a score at all. ... Even if you have been using credit within the past few months, you can still end up without a score. That's because some lenders might only report your account activity to one of the credit bureaus or not report it at all.
3 things you should do if you have no credit history
The standard advice is to keep unused accounts with zero balances open. The reason is that closing the accounts reduces your available credit, which makes it appear that your utilization rate, or balance-to-limit ratio, has suddenly increased.
Unless your balance is always zero, your credit report will probably show balance higher than what you're currently carrying. Fortunately, carrying a balance won't hurt your credit score as long as the balance you do have isn't too high (above 30 percent of the credit limit).
If you don't use your credit card, the card issuer may close your account., You are also more susceptible to fraud if you aren't vigilant about checking up on the inactive card, and fraudulent charges can affect your credit rating and finances.
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