What’s a Credit Score? An Intro to Credit Reports and Credit Scores
Published on - January 10th, 2011 (Modified on - January 2nd, 2013) (by Sierra Black) This post is from staff writer Sierra Black. Sierra writes about frugality, sustainable living, and getting her kids to eat kale at Childwild.com.
A good friend of mine recently asked me what a credit report is and how he could get his hands on his. My friend has a PhD. He’s a smart guy, and generally savvy about life. If he was asking me this question, he can’t be the only one wondering.
So I called up Ken Lin at Credit Karma to have a chat about credit scores and credit reports.
Credit Reports
Perhaps the first thing you need to know is that a credit score and a credit report are two entirely separate things. Your credit report is the raw data, while your credit score is what a lender makes of that data using one of dozens of credit scoring models. Lin likened this to preparing a meal. The credit report is your raw ingredients, the scoring model is your recipe, and the three digit number you get out as a credit score is the finished dish.
There are three primary credit reporting agencies: Experian , Equifax, and TransUnion. Each of these credit bureaus maintains a separate credit report on you. Any time you see a credit score, it’s based on a report from one of these agencies. There are no combined scores based on data from all three. Lin recommends pulling your credit report from each agency once a year, so you know how your credit is doing. This also gives you a chance to check your credit reports for errors.
To pull your credit report from each of the three credit bureaus, go to annualcreditreport.com. This is a government-approved website that will give you free access to your credit report. Credit reports don’t include a credit score. Each of the credit bureaus will try to sell you paid services to get your credit score as well as the credit report. Don’t buy it. You can get that information for free on Credit Karma. I normally avoid endorsing specific sites or services at Get Rich Slowly, but I’ve been using Credit Karma for years, and always had a great experience accessing my credit information when I need it.
Once you have your credit reports, check them carefully for discrepancies or errors. Up to 50% of credit reports have mistakes on them. These can range from simple typos to major problems. If you do find an error, Lin recommends disputing the problem with the bank that reported it, not the credit bureau. Banks report their financial information to credit bureaus every 30 days. That means that even if the credit bureau agrees with you that the information is wrong and fixes it, it will be reported again by the bank and go back on your credit report 30 days later.
“You really need to fix it at the source, which is the bank,” Lin says. “Otherwise you’ll be caught in this endless loop of getting it deleted and having it come back.”
Credit Scores
To extrapolate a credit score from your credit report, lenders use credit scoring models. There are dozens of these, but FICO is by far the most common (with the Vanguard Vantage score in second place). Different scoring models stress different aspects of a borrower’s credit history. One might tell a bank how likely you are to default on your mortgage, for example, while another will model how likely you are to let your credit card payments lapse by 90 days. Depending on what bank you apply for credit with and what kind of loan you want and what model they use, you’ll wind up with a slightly different credit score.
Since your credit score will change depending on what model is being used to generate (it and what credit report it’s based on), you don’t have one stable credit score, but rather a range of scores depending on these variables. The difference can be as much as 50 points. That’s a wide enough range to push you up or down a bracket in a bank’s interest rate scale, so it’s worth watching.
A good credit score is worth its weight in gold — and then some. Lin told me a person with lousy credit might well pay a million dollars in higher interest rates and fees over the course of his life. That’s a whole lot of wasted cash.
How to Boost Your Credit Score
Your credit score touches every major part of your financial life. Some employers check it as part of a background check on a new employee, to see how responsible you are. Landlords want to see your credit report and credit score to know whether or not you’ll pay your rent on time. A great credit record is a must for any big loan like a mortgage or an auto loan. And your credit score affects the price you’ll pay for auto insurance as well.
A good credit score is anything over 700 points. A score of between 750 and 850 is considered excellent. If your credit’s not already in this range, Lin recommends a few simple steps to get you there.
- Apply for one new credit card each year for five years.
- Use each card sparingly, maybe to pay for some everyday expense like a tank of gas or a grocery run.
- Pay each card off in full each month.
If you follow these steps, this approach costs you nothing, and can help you build a great credit rating in a short period of time. You may also qualify for some rewards programs or cash incentives from the credit card companies. However, if you’ve ever had any trouble with impulse spending or credit card debt, I don’t recommend this course of action. Even the best credit card offers can be a slippery slope for people with a spending mindset.
If your credit is in bad shape, don’t despair. Lin also has suggestions for turning terrible credit around.:
- First, get all your bills current.
- Next, make a commitment to keep them current. Any time you miss a payment, you start over at zero with the credit bureaus. To improve your credit, you have to be entirely consistent about paying every bill on time.
- Finally, establish a secured credit card. This will give you a line of credit that you can use to begin reestablishing a good credit history.
Doing these three things can nudge your credit score up as much as 150 points over the course of a year. Whatever your credit score is, I hope you now have more tools for how to get information about it, how to use it, and how to improve it.
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What if the world suddenly paid for everything in cash? Credit would no longer be relevant.
I have written about credit myself at my personal finance website, and while it would be great to be able to ignore credit, it simply isn’t possible. Why not? Because employers are now pulling credit scores for job applicants. It really is unfortunate, but credit is still important, even if you’re rich and don’t need it.
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“Finally, establish a secured credit card. This will give you a line of credit that you can use to begin reestablishing a good credit history.”
Question, what is a secured credit card? Normally when you refer to anything “secured” related to credit it means you have put up some type of collateral against a specific amount of debt. If you default on the debt then that thing or things could be repossessed if you don’t pay your bills. That isn’t usually the case with a credit card so I wasn’t aware such an animal as a secured credit cards exists.
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Your friend with the Ph.D was certainly not alone in wondering what a credit was. This post is quite detailed and explains a lot. One thing I cannot get is why I need to get even more credits cards to improve my credit score.
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I looked at my credit report recently and there is some really old stuff on it. The thing I learned was that a mistake will not be forgotten, so don’t make another one.
(That ‘mistake’ really should be removed, I need to take care of that…)
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Nice article.
I do not check all the credit reporting agencies at the same time. I check one, then four months later check another one, etc… this way I can check my credit three times per year instead of just once.
Also, what does someone who is trying not to borrow money do who hasn’t bought anything on credit in years? Do they automatically pay higher insurance premiums or higher rent? If so, this doesn’t sound at all fair.
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When you close a credit card account, make sure you ask the bank for a permanent account closure (I suspect it costs your bank some extra money).
I had a joint card with my ex-wife. When we divorced, we cut up the cards and sent a letter to the bank to close the account. Several years later, I had a collection agency on my tail because a Blockbuster card linked to that credit card had been used by my ex and a small late fee charged to the long-”closed” credit card. If your bank does not tell Visa/Mastercard to make the change permanent, they make it good for a year only, and will reopen your account for charges made after that! Since I had moved a couple of times, I never received an account statement… This was 10-15 years ago, so things may have changed since then.
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Mark, I would think to “maintain” a good credit score, you should probably do what is advised to do build a good credit score: buy a few low-cost items each month on a credit card (groceries, gas, etc) and pay them off in full each month. This could work to your advantage if you use rewards cards.
What I would like to see more info on is, how the credit scores of married couples mix. My wife has a low credit score and I have a high one; if we were shopping for a loan, we would have problems, correct?
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Thank you for letting me know about Credit Karma. Holy buckets, I had no idea I could actually get my credit score free! I owe you one dude!
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After FICO, it’s the Vantage score, not the Vanguard score that rules the credit world.
And about the scores Credit Karma gives: I’m a Credit Karma user and I do find their scores and their entire site useful. They’ve historically given users free access to a TransUnion score called “TransRisk.” I think people need to know that this score is not the same one banks and other lenders get. The credit bureaus offer one set of scores to the public and a different set to lenders. In my experience the TransRisk score is close to the one banks get, but not the same. (In another case, the score I purchased from Experian via a Discover card partner program was a whopping 65 points different than the Experian FICO score my bank got!)
So if you really want to know your score, you do have to buy the FICO score, not some other score that may be offered by the same agency.
Also, Credit Karma has recently begun offering the Vantage score for free. I hope — but don’t know — that this is the actual Vantage score a lender would pull.
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Thanks for another article on credit scores….seems like this topic is over-used on financial blogs..but regardless it is good information.
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The score that I got from credit karma is alot lower than what the reporting agencies have. Please keep this in mind when you get your score.
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There’s a lot of room between a lousy credit score and a great credit score, where you can hang out without getting dinged much on interest rates, insurance rates, and rental applications. I’d rather stay there than wasting my time trying to improve my score. A high credit score is not evidence of moral virtue. Credit scores were created by creditors, for the benefit of creditors.
I do my own “creditor scoring”, and very few receive even a “tolerable” rating.
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I’m flummoxed because to improve my score I would need to both diversify my credit and lengthen the average time–but in order to diversify the only thing I can think of is to get a new credit card, which would pull down my average time.
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What if you have credit showing from the past that were closed? Ones like Old Navy, Mervyns, Home Depot….not the big credit card companies, but more retail specific credit cards. Does this show as negative if they are still sitting there? They are all paid and closed.
Thanks!
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The scores from Credit Karma are not your FICO score which is what lenders look at. So it may approximate your FICO score, but is not the real thing. That is why it is free!
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Why do people focus so much on a credit score? Sure, a lower score hurts your credit. But unless you are about to make a big purchase, your credit score isn’t important. Better to focus your effort on good money management. Kind of like an overweight person constantly stepping on a scale – its just a number.
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I have to agree with KDB. A credit score is just a number that indicates how well you deal with debt. Do you really want to deal with businesses that simply reduces you to a number, rather than looking at what you do in real life?
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The article doesn’t mention, but should, that the credit scoring models used by each credit agency are secret, and no one outside those agencies knows exactly what they are. Any other site, including credit karma, is forced to approximate those by making up their own models that arrive at similar numbers.
Similarly, the numbers that the credit bureaus will offer to sell you alongside your credit report are not the same ones they give to lenders. I’ve actually tested this personally by paying for my scores from the credit bureaus and then, the next day, having a mortgage lender run my credit. The numbers that come back are different, by significant amounts.
“A good credit score is worth its weight in gold”
I agree with this, but only because the weight of a credit score is zero.
“Lin told me a person with lousy credit might well pay a million dollars in higher interest rates and fees over the course of his life.”
He also might well pay 0 in higher interest rates and fees over the course of his life, if he doesn’t borrow any money.
Also, one more thing not mentioned in the article that should have been — negative items expire off your credit score after 7 years (and i believe 10 years for some more egregious ones, like bankruptcy), which means they no longer affect your credit score.
If our hypothetical person with a bad credit score who was going to spend an extra $1,000,000 in finance charges and fees over the course of his lifetime ruins his credit at 23, then changes his ways and stops doing the things that ruined his credit, he will be working from a clean slate by 30. I doubt he would rack up $1,000,000 in finances charges in the meantime — for something like that to happen he’d have to keep doing stupid things his whole life long, never letting his credit score recover.
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@KDB:
It’s not even really like a scale — it’s like a scale that only shows you your average weight over the last 7 years, but not how much you weigh right now.
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I have a friend who has a bad credit score and is determined to live without credit. I tried to explain to him that this is important to have a good credit score, he counters with “I’m not going to buy a house, I’ll buy a car in cash, etc.” Other than the employment thing, what would you recommend I tell him the credit score can influence? He’s an academic with a tenured job so that doesn’t hold much sway.
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As a previous loan underwriter, one of the most frustrating (and common) things was to get called up by the dealership, and have them argue with us over the client’s credit score. Because, inevitably, the client had gotten their score off of some website, and they didn’t realize that every.single.financial services industry weighs things differently. We had a different way of coming up with a credit score than, say, a mortgage lender might, because motorcycles carry different risk indicators than mortgages…
It was incredibly annoying to try and battle a confident consumer who was adamant about not getting “screwed” because they were “informed” and they knew their score. Um, no. You got a random score off of a random website and it has nothing to do with our risk calculations. It is a good approximation, but honestly the best thing these websites can do for you is to make you aware of potential inaccuracies on your report so that any mistakes are taken off of your report. If you want to pay the money for your score, go for it, but please do be aware that that is not the score that a lender is looking at. We were often unfairly cast as screwing over customers because they had just enough information to be dangerously uninformed as to how lenders manage risk and score potential clients.
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An important topic and one I think more financial advice should be directed toward. My favorite site for getting answers is myfico.com – their forums are GREAT for help!
Here are some answers to questions brought up already:
@chett: yes, it is somewhat like a debit card, but after using it correctly, you can get it unsecured – ie, it can become a regular credit card. Also, it does not come out instantly, like a debit card – instead, you must pay the bill each month, like a regular credit card.
@#4: you can build a credit score with other instruments (ie loans) – and you NEVER have to pay interest for a good score, just pay before the statement cuts in full and you’ll be fine.
@#5 Everyday: you can “goodwill” a mistake – ie, send a letter to the company asking them to remove it – they must report correct information, but they don’t have to report all information and that can improve your score by removing “baddies”
@Mark: Good tip! Also, some states allow more than one free report (ie, CO, GA, etc) so if you live in one, you can pull and should pull more often. And yes, if you have a low or no score because you have no loans or CC then you can potentially pay more – that’s where a human can come in handy instead of a computer assigning costs.
@8:Lonnie – they do NOT mix – your credit score and report are yours alone. However, if you jointly buy something (ie a house) or jointly apply for a CC, then it shows on both your reports and if one person doesn’t come through, both of you suffer. However, if you have a high score and your husband a low one – as long as you keep your cards, house, etc separate, it won’t affect you (of course, if you rent, get joint insurance, etc, those are JOINT and it will affect you)
@14: diversify means loans, CC (both bank and store), mortgage, etc – and yes, adding will bring down the score a little because it’s new, but once you let that age, it will go back up – a good score takes time!
@15, Karla: once closed, a CC will stay on you report for 10 years – that’s ok, it makes the age higher! If you have “baddies” (ie, a late payment), they will stay on 7 years – EVEN IF THE ACCOUNT IS CLOSED.
Hope that helps a little, again, I suggest going to the myfico forums for more help, they really are great.
Finally, remember, even though Credit Karma, Quizzle, etc give a report and a score, the only real score must be bought from MyFico.com (although they do have coupons!).
Good luck with building your credit and remember: YOU NEVER HAVE TO PAY INTEREST FOR A GOOD SCORE (although if you never pay interest on a mortgage, you are better than me!)
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@Ris:
I ruined my credit score 7 years ago. I have survived *just fine* in the interim by not using credit cards, buying a car in cash, not buying a house, etc. The lack of a credit score caused my almost no problems whatsoever except for a couple hassles trying to rent apartments, and even then I still managed OK.
Your friend will be fine. Leave him alone.
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I understand using your credit score in order to easily obtain more debt. I don’t understand using it for anything else.
Currently my husband and I have great credit scores. A few years ago, they were even higher, as we had quite a few loans and credit cards that we paid every month.
In the future, our credit score will continue to plummet, I’m sure, until all our closed accounts fall off and we become marooned in the land of “no credit score”.
I’m not worried, though, because we’ve become debt free in the past two years, slowly paying off loans and accounts, and then closing them. So for us, the lower the credit score, the better off we actually are in real life. No car loans, no student loans, etc. What will we do with no credit score, you ask? (Besides celebrate, you mean?) Well, I’ll tell you what we won’t do: We won’t open another credit card, because we have the money to pay for things today. We won’t obtain a car loan, because we have the cash to buy a car. Before an insurance company or potential employer even runs our report, we will be honest about our (smart) life choices, and if they turn us down, that is their loss, because we are (arguably) more responsible than many people with high scores. And I know this is outrageous and unbelievable, but its true: Our next home will be bought with cash. No mortgage needed.
Worshiping the FICO is no longer on our agenda. Living within our means and according to our own priorities is. (And before you ask, we make less than $70k/year household gross, so we don’t fall into the “you’re rich so you don’t need a score” category.)
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So up until this point in my life I have completely ignored the concept of a credit report. After reading this article I decided to check my credit report…
I just got done checking my credit score using TransUnion. What I found was that they force you to imput your credit card info, even for the “free-trial” and then make it next to impossible to figure out how to cancel your “free-trial” online afterward. I was on the phone with customer service for 25 minutes while they looked for my account (total phone time was 40 minutes!). I’m guessing this may have been because I canceled immediately after opening my account (but if you don’t will you remember to cancel within the 7-day trial window?). I would venture a guess that the other two credit bureaus would have similar “must imput credit card info for a free-trial” and then canceling difficulty?
I also have a question about what constitutes a “good” to “excellent” score. Sierra says in her article that a score of 750-850 is considered excellent. My score falls in this range (the top end actually) but the credit report gives my score a “B” rating. Is that just to motivate me to pay for the various credit managing tools offered on their website? What is the effective difference for a score in the mid 800s compared to a score in the high 800s to 900s?
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@Ris:
The price you pay for insurance, especially auto insurance, is based on your credit score. The better your credit score, the lower your insurance premiums.
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You can’t make a habit of this, but having a good credit score can also give you some leeway to tell bad business practitioners to go to hell.
I did this to Sprint. They really made me mad and weren’t treating me the way I felt they should treat a long-time customer. I canceled my phone account with them and told them to take the last month’s bill (the item under dispute) and shove it. They slapped on an ETF fee and sent it to collections.
Collectors called, I told them I don’t owe them a dime, I’m not giving them a dime, and to send me something in writing. Once they did that, which they are legally required to, I sent them a cease calling letter. I pulled my credit reports and tagged on explanations for that negative item (yes, you can do this).
That was over a year ago, and since then no collectors have called me and I just got a Capital One rewards card which gives 2% cash-back for gas and groceries and has no foreign transaction fees. It feels good to have had the freedom to tell someone who’s billing me for bullshit that they’re never going to see a dime.
Edit: I also already own a home and have enough emergency savings to outright buy a used car should mine break down catastrophically. Otherwise I wouldn’t have been so courageous. But that’s kind of the point – if you’re in good financial shape, you have the freedom to take a small hit once in a while without any repercussions. And I mean a small hit – in the low hundreds. If it was a large amount I would have thought twice and/or taken matters to another level such as the authorities or a court.
@Joe
My premiums might be higher because of what I did, I’m not sure, but they seem the same. Even if I ended up paying the amount twice over due to higher premiums, that’s fine with me because it’s still not going to Sprint. I refuse to pay them on principle. It’s a punishment. Sure enough, the government has started to regulate how much they can swindle people for ETFs, but a little too late to help me.
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Katelyn, try using the creditkarma link in the original post for an initial credit score.
annualcreditreport.com is THE federally approved portal for getting FREE credit reports for the three major credit bureaus. You do not have to enter your CC with Experian/Equifax/TransUnion if you go through annualcreditreport.com.
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@Everyday Tips
A mistake will be forgotten. Any negative item over 7 yrs old on your report should be removed, by law. You should be able to flag those items for removal to each of the credit agencies when you check your reports.
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What if you have good credit (at least have never had debt, paid a bill late, etc) but keep getting told that your credit score doesn’t qualify you for things?
That’s vague, but the specifics are that the above characterization describes my boyfriend — who can’t get a credit card (though he had one before that he paid in full, on time, all the time) and can’t open an ING checking account because of “a problem with his credit”. We’ve tried calling all the agencies but no one will tell us anything and his credit report doesn’t show anything. The banks won’t tell us anything either. It is incredibly frustrating.
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@Ris You should know you can’t tell an academic anything
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People who just don’t want to use credit should be aware that some mortgage lenders will use “nontraditional credit” for making loans approvals.
What is nontraditional credit?
It’s providing proof that you pay other obligations on time even if they aren’t conventional debt–examples include your rent, utilities, car insurance etc.
Not all mortgages allow nontraditional credit but it’s worth looking into. I’ve helped some immigrants who don’t have the borrowing mentality to get mortgages using nontraditional credit.
It’s harder to get around without credit cards but not impossible.
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Credit scores are a ridiculous marketing scheme and an unfortunate consequence of the “information age”. Look no farther than the real estate bubble and record foreclosure rates for a good indicator they are basically useless.
Example, my Chase card doesn’t report a credit limit to the bureaus, which hurts my score. I pay my balance every month, but to them, even $1 charged on it shows a credit utilization of 100% for that card.
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I have written repeatedly on my site about how important it is to be honest with yourself about your financial starting point (your baseline) before setting new financial goals. The credit score is a sure way to keep us all honest with ourselves! Thanks for this review of a very important “basic.”
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I’m always a bit confused by the idea of gaming the system (taking out extra credit cards etc.) to get a higher credit score. This tells me that the score has become the point rather than that the score is measuring something real, like how credit worthy someone is.
My husband and I have no debt, other than credit cards that we pay off every month. Like many near retirees, we’ve been working to get our debts to zero and our savings to a point that we can buy things like cars (as needed) without credit.
Is there any reason that we should be very worried about our credit score? Other than that it be at a reasonable level in case we need to rent – or borrow for some catastrophic need in the future?
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@26: the score you got for free isn’t real. Thus you can’t use the range in the article. You have to buy your real score.
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One thing to remember … those dings or negative marks that “fall off” after 7 years, they don’t necessarily fall off automatically. In a perfect world they do, but one of the reasons you should monitor your report is to make sure any lates payments, charge offs, etc that are legally too old to impact your report have been removed. If they haven’t, then you’ll need to contact the credit report to make sure they are taken off. Other than that, just a matter of monitoring for identity theft type stuff and mistakes.
I’m not a fanatic about my credit report, but I keep an eye on it. I figure if the report is good and I keep my financial house in order, then the scores take care of themselves. I keep 2 credit cards, paid off each month and two loans (house and student). No other debt than that and always keep my utilities paid on time. That’s it. When I went to buy my house last year, the loan officers I was shopping just about fell over themselves complimenting my credit score. One said he’d only seen 2 other people with all 3 scores over 800 (mine were just barely, like 802). *shrug* I think it helps that while I’ve racked up credit card debt before, I’ve never really been in trouble financially. No late payments, no bankruptcies, etc. I would be interested to see how much my home loan impacts my score since my income hasn’t grown, but since I’m not planning on needing a new loan anytime soon I don’t really care that much.
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In addition to the “Big 3″ credit bureaus, there is a fourth credit bureau and other “consumer reporting agencies” that compile data on consumers and sell it to corporations.
The fourth credit bureau is called Innovis. According to Wikipedia:
“Innovis began as ACB Services – founded by Associated Credit Bureaus (ACB), in 1970. In 1989 ACB Services was purchased and renamed Consumers Credit Associates (CCA). First Data Corporation purchased CCA and renamed it Innovis, Inc. in 1997. Most recently, CBC Companies purchased Innovis, Inc. in 1999.[4]
As of 2008, CBC Companies claims it has provided consumer credit information through its credit bureau organization for over 55 years.”
To order your Innovis credit report go to: (https://www.innovis.com/InnovisWeb/pers_orderCreditReport.html) and follow the instructions on the website.
Consumer reporting agencies include PRBC and Choicepoint. PRBC started in 2002 as means for consumers to establish credit by reporting bill payments such as rent and utilities. LexisNexis (formerly choicepoint) sells data regarding your employment history, residence history, and insurance claims data. I’ve e-mailed PRBC for instructions on how to receive a free copy of my report, however Lexis makes it easy; simply go to this site (https://personalreports.lexisnexis.com/), follow the instructions, and fire away.
Although the Big 3 dominate the credit world, they’re not the only act in town when it comes to keeping databases of information that may negatively impact you if there are errors in your file. Errors in any one of these databases can end up affecting your career, the price you pay for insurance, or whether or not an insurance company will underwrite a policy for your home. Be prudent, and keep tabs on these guys, because I’m pretty sure if you’re not then nobody is!
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LOVE the link to creditkarma. Even if it is not the “real” score as others have said, it is SOOO helpful for me to play with the calculator tools and see how proposed actions would affect the score. Some actions like paying off more debt had relatively little impact (10 points) while other actions like missing ONE monthly payment had a huge impact (50 points!!) LOVE knowing what is going on behind the curtain.
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One super easy thing I did a couple years ago to improve my score was call my credit card company and request an ‘increased credit limit’. I have never charged more than $2,000 in a month. But I read once that keeping your usage under 10% looks the best. So I asked to up my limit from $3000 to $12000. Suddenly, that part of my score rates A.
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I’ve never had a credit card in my life, I pay all my bills on time, paid off my mortgage, and I have over 100,000 dollars in various securities and cash. In fact, I lead a “zero debt” lifestyle. Yet, my credit score is somewhere between “Good” and “Poor” according to the various rating agencies.
These scores seem pretty bogus to me. Who is a better credit risk: a guy with loads in savings and investments, or a guy who has three credit cards and a high limit on all of them?
It is sad employers look at this and if I want to look for a job, I may have to game my score up.
Is there any chance that you all would have an article on the agencies’ algorithm for conjuring up these questionable scores?
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I think that pulling your credit report and scores on a regular basis is a good thing. For me, it took something happening, or needing something, to force me to do it. Typically, I never cared. I have excellent credit, but I think your advice of pulling it regularly and staying on top of it is great advice.
Thanks!
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Credit scores can be a hard thing to understand sometimes. Just because you pay all your bills in cash and have no debt does not mean you have a good credit score. Banks want to see that you can pay back a loan, so if you have never borrowed money then the banks have never seen you pay it back either, hence they give you have a bad credit rating.
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