You Can Have a Bad Credit Score Without Having a Credit Card

Updated: November 25, 2023 Author: Paul Gillooly

Quick answer: Yes, you can still have bad credit without having a credit card. A bad credit score can be the result of a number of factors including missed payments on loans, finance and phone contracts among other things.

Navigating the credit score landscape can be intensely challenging at times, and it can be difficult to keep on top of what does and doesn’t affect it. There are many misconceptions about credit scores and the ways that we can rack up bad credit, and we always do our best to debunk those on this site and provide comprehensive answers. To answer this question, we should first look at what constitutes “bad” credit and the different ways that this can be accumulated in everyday life. 

What is Bad Credit?

Bad credit is when an individual’s credit score is insufficient for lenders to have confidence that they will get their money back on time if they lend it to someone. In practical terms, this means that you will be a lot less likely to be offered credit or a loan at a decent rate and that if you do decide to borrow, it may be at far higher rates of interest than you would otherwise have had to pay. The interest rates on loan products offered to those with bad credit ratings tend to be much higher, reflecting the level of risk that the loan providers perceive with the transaction.

What is a Credit Score?

Everyone is assigned a three-digit credit score, which credit reference agencies such as Equifax and Experian calculate and adjust based on a wide variety of factors that consider lifestyle and financial liabilities. Financial liabilities include rental or mortgage payments and recurring bills such as utilities and Council Tax.

Credit reference agencies take into account a wide array of information when they calculate a credit score and have a broad overview of your financial situation. The number of financial dependents you have will also be a consideration in calculating this and will be weighted against how much you earn. It stands to reason that if you have more people relying on your sole salary in the household, this will reduce your credit rating.

What Are the Causes of Bad Credit?

Not Being on the Electoral Roll

One of the factors in calculating a credit score is whether an individual is on the electoral roll and whether they have updated their details to reflect their current address. Not being on the electoral roll will restrict your right to vote in elections and referendums and will count as a negative regarding your credit score. 

This is because being on the electoral roll provides a higher level of verification and certainty that you actually live at the address you are using when applying for credit from lenders, whether for a credit card, a hire-purchase agreement or any other form of credit. 

Local authorities send out a form annually which asks the householders to verify whether there have been any changes to the people on the electoral roll at that address in the past year. If you don’t live there any longer, the new householders should, in theory at least, remove your name from the electoral roll at that address. Therefore, if you are on the electoral roll, lenders can know with a reasonable degree of certainty that you are still at the same property.

Opening Multiple New Credit Accounts

If you open multiple new credit accounts in a short time, this can sometimes be seen as a mark of financial irresponsibility or difficulty. The view of the credit rating agencies is that having access to more credit options can mean that you are financially leveraged beyond what you would reasonably be able to repay if your financial circumstances suffered a downturn, such as a redundancy. This then poses a risk to the lenders that you may seek to be declared bankrupt to avoid paying back the money they loaned you.

Opening multiple credit accounts in a short period is often a sign that someone is struggling financially and that they may be juggling different, competing debts with disparate lenders to be able to keep themselves afloat while ultimately heading toward bankruptcy at some point in the future.

Being “Financially Associated” With People Who Have Bad Credit

What does being “financially associated with someone” mean? This term tends to refer to a family member such as a spouse with whom you have shared bank accounts and other financial dealings. If one partner goes into the marriage with a bad credit history, this can impact the other partner as well. Sharing bank accounts which have an overdraft facility and mortgages can damage the credit rating of the other partner as a lender will almost certainly view their credit report when their partner applies for finance in the future.

This is something that can have a real effect on some relationships, particularly where relative financial positions were not discussed in advance of becoming “financially associated” with each other. For this reason, it is always worth talking about any previous financial issues before taking a large relationship step that may make accessing credit much more difficult in the future. Openness and honesty in this, as in all other aspects of life will often make for a much more successful relationship in the long run and can at least offer the opportunity to avoid the pitfalls associated with financial association. 

It is entirely possible to avoid financial associations by ensuring that any bank accounts you share don’t have the option of an overdraft facility and that you rent rather than buy or only have one name on the mortgage. In practical terms, this would probably necessitate a legal agreement between the parties that although only one name is on the mortgage, the other partner’s payments toward it would entitle them to a percentage of the house’s value, should the relationship break down.

Having County Court Judgements Against You

A County Court Judgment or CCJ is when someone is taken to court by a creditor and ordered to pay money that they owe to them. Depending on the defendant’s financial circumstances, they may be ordered to pay the debt in instalments, and they may ask that the amount be changed if they feel that they still can’t afford to pay. This is known as a request to “vary” the judgment. 

It is possible to ask for the judgment to be overturned, or “set aside” in legal parlance if the defendant doesn’t owe the money or if they didn’t receive the initial citation, which would have allowed them to respond. This can only be done where the defendant has proof that they don’t owe the debt they are being asked to pay or the citation had been sent to an address they weren’t living at.

CCJs are often used to recover debts when there have already been concerted efforts to come to a more reasonable solution for payment. They are very seldom a first option as court action can be costly to pursue. Having County Court Judgments on your credit record can make it very difficult to secure other loans or finance because financial institutions don’t want to loan money to people who have to be taken to court in order to ensure the repayment of their equity. It is easy to understand why they take a dim view of this. 

Filing for Bankruptcy

It should be noted that filing for bankruptcy will be one of the most damaging things you can do to your credit score. This makes sense, as it is a drastic step and should only be attempted once all other options have been exhausted. It means that those you owe money to can no longer chase you for repayment. 

Suppose your debts get to a point where they are completely overwhelming and you have no chance of keeping up with the interest payments, never mind making an impact on the original amounts borrowed. In that case, you can apply online to be considered bankrupt. You should only do this if the value of any assets that you own is lower than the amount of debt that you are servicing.

Being made bankrupt is something to take seriously, and you should seek the best debt advice possible before even considering this step. While it may seem an attractive option when debts have spiralled out of control, being declared bankrupt can have a devastating effect on many aspects of life. You will be barred from running a business while you are what is known as an “undischarged bankrupt”, which typically lasts a year or more, and if this was how you made a living, you may struggle to re-enter the jobs market.

Your bankruptcy represents a financial loss to the lenders in question, as most debts are written off at this point, which is why your credit score will be hit so badly. You will have proven yourself to be a bad risk for future lenders, and your credit score will be severely downgraded to reflect this.  

The Insolvency Service will appoint an official receiver when you are made bankrupt, and they may sell off any assets you have to pay your creditors what they can.  

Credit Card Debt

In many cases, credit card debt can be part of the lending mix and can contribute to the problems experienced. Before the financial crash, it was much easier to be accepted for many different credit cards, and many consumers found themselves being offered large amounts of credit on various credit cards. This practice has slowed down somewhat since the financial crash, but it is still possible to be approved for multiple cards with varying credit limits.

Many people have found themselves in financial difficulty, especially since the advent of the internet. It is relatively effortless to spend money online or to get drawn into online gambling, and some people have a disconnect between the numbers on the screen and the real money in their bank accounts or on credit cards. 

This leads some to spend way more than they would in a physical store because money spent online doesn’t feel as “real” to them. Even though it doesn’t feel real, it definitely is, and running up debts by purchasing or betting too much online can cause extensive problems in their everyday lives.

Conclusion

Many factors can lead to bad credit, such as not paying direct debits on time and defaulting on money owed. Running up debt on credit cards can often be a factor in this, but it is entirely possible to achieve a bad credit rating without ever having access to a credit card. There are many ways to run up debts, including bank account overdrafts, falling behind on utility bills and failing to pay Council Tax instalments on time. 

Many people have significant financial difficulties without ever using a credit card. Unfortunately, this sometimes results in bankruptcy, which is far from an ideal option for any of the parties involved. The lenders lose the money they loaned, and the person concerned has to endure a challenging period when their finances are overseen by an official receiver who will decide how much of their salary they need to pay monthly toward their liabilities. 

Using a credit card regularly and paying off the balance at the end of the month can improve a credit score as it becomes an ongoing record of positive debt management and personal financial responsibility. 

This is similar to regular mortgage payments that are consistently made on time without any of them being missed. Being able to pay all of your outgoings on time will only help to improve your credit score. It is possible to pay to check your credit score at any time by visiting the website of one of the credit reference agencies such as Experian or Equifax.