If you don’t have a payment history because you have never relied on credit, the credit bureaus will assign you a score of zero. This may seem like a good thing, because you’ve never been in debt.
However, it also means you are unproven as a debtor, and creditors will be sceptical. We find out what a score of zero will mean, as well as whether you can make your way without a credit score.
Tip: Don’t struggle with debt when you can consolidate it today.
What does life look like with a score of zero?
According to Eloise Boezak, head of customer experience at African Bank, if you don’t have a credit score you will not be able to access credit.
“A well-managed credit score allows you to access, for example, a home loan or vehicle finance, and to cover unexpected expenses, such as medical bills,” she explains. “Most South Africans don’t earn a monthly income that makes cash purchases possible, even on smaller items such as cell phones,” says Boezak.
Lindie van Gass, a certified financial planner who runs personal finance blog Bank Beter, agrees that you can only avoid building a credit score if you have enough cash to cover all of your expenses.
“The reality however is that it’s unlikely you’ll have enough money to cover fixed assets from a young age, and you’ll never be able to get a loan should you want to buy assets,” says Van Gass.
Ramona Singh, administration director and registered debt counsellor at Infinite Life, goes so far as to say that no credit can mean no opportunities.
Is it possible to succeed with a zero credit rating?
Notwithstanding the pitfalls, Sheila-Ann Robey, Financial Adviser at Lifeguards, an affiliate of Liberty, believes it is indeed possible to go through life with a credit score of zero.
“I have come across several individuals who have managed this feat, either because they have just started their career and have not entered into any credit agreements, or as a result of existing wealth, where the individual has never needed to enter into credit agreements,” says Robey.
What can you do to build a credit record?
Should you need credit however, Robey advises the following. “To create a healthy credit score, you can take on some small credit, such as a store card, for a short period and pay the instalments before the accrual of interest.”
She adds that paying your debit orders timeously, including medical aid or cell phone contracts, also bodes well for a healthy credit score.
Do you have a credit score of zero? Sign up with JustMoney today and find out where you stand.