What is a Credit Ghost and How to Avoid Being One?

Posted by Sha'Kreshia Terrell in CreditAugust 12, 2022(Last Updated November 23, 2022)5 min read
Key Takeaways
  • A credit ghost is someone who has never opened a line of credit, meaning they don’t have a credit score. A credit ghost is also someone who has an inactive credit history. 
  • Another term similar to credit ghost is credit invisible.
  • You should check your credit report each year to ensure you know what is on your report because what you see on your report is also a summary of what lenders will see.
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A credit ghost is someone who has never opened a line of credit, meaning they don’t have a credit score. A credit ghost is also someone who has an inactive credit history. Another term similar to credit ghost is credit invisible.


Someone who is a credit ghost has a nonexistent credit file with the national credit reporting companies. Also, if a person goes years without using their credit, it can risk the credit card company closing their account. Account closures can decrease a person’s credit score and, in turn, stop the credit card company from reporting to the credit bureaus. 


It’s important to know that there are two types of credit ghosts: scored and unscored.


Scored Credit Ghosts


Scored credit ghosts have some credit history on their credit report but not a sufficient amount to where lenders can make an accurate decision on whether to lend them money or not. They could be someone who has borrowed money only a couple of times and paid it back on time but hasn't used their line of credit since. A scored credit ghost can also be someone who has never borrowed money but have credit accounts opened in their name. 

However, even a scored credit ghost must actively use their credit to build a good credit history. Plus, when you have credit accounts open but haven't used them in more than six months to one year, you run the risk of getting your credit accounts shut down, which can decrease your credit score.


Unscored Credit Ghosts


If you’ve never borrowed money or opened a credit card account, or your information hasn’t been added to your credit report, you are considered an unscored ghost. 


Those who use cash rather than a credit card to make purchases will also be classified as unscored ghosts because they don’t have a credit history to track their purchases. To establish a credit history, you must open a credit line responsibly. A line of credit is defined as an amount of credit that a lender extends to a borrower. A line of credit can be opening a secured or unsecured credit card, home equity loan, or business credit card. 


Recommended Read: The Difference Between a Credit Report and Credit Score


By building a solid credit report history, lenders will notice that you are a responsible consumer who can manage credit and repay lenders on time. In addition, when lenders see how financially responsible you are, they will be more likely to loan you money.


Cons of Having No Credit


Some people unknowingly choose to have no credit history. For example, a person can reject their chances of building credit by using the all-cash method when making purchases. The all-cash method is excellent in some cases, like trying to curb impulse buying and overspending. 


However, the all-cash method isn’t helpful when you want to gain credit history. In addition, there are other cons to not having a credit history that can hold you back from achieving specific financial goals, including:


  • Unable to purchase a home
  • Unable to buy a vehicle
  • Higher deposits
  • Higher interest rates
  • High insurance premiums
  • Issues obtaining credit cards and loans


You are considered high risk when a lender can’t pull your credit history.


Benefits of Having Credit


When you have a great credit history, you are deemed creditworthy by lenders. You will also have an easier time obtaining lines of credit like credit cards or loans. Also, getting approved for a cell phone, mortgage, or car loan with lower interest rates becomes much easier. You can also save money with insurance companies with little to no deposit.


Recommended Read: What is a Credit Profile and How Can I Repair My Credit?


How To Build Credit or Improve Your Score


When building or improving your credit, it’s essential to know how to manage your money responsibly and avoid becoming a credit ghost or identity theft victim The best way to do this is by checking your credit report regularly and monitoring any changes. You should also protect your personal information like your social security number, credit card information, and debit card information.


Pro Tip: CapWay offers many resources to help you improve your financial situation and build wealth. 



Dispute Errors on Your Credit History


If there is a mistake on your credit profile, you should contact the lender or one of three national credit bureaus (Experian, Equifax, Transunion) and dispute the error. For example, if there is a collection bill, fraudulent charge, or credit card account you do not recognize, you should dispute it immediately. 


A dispute is when a consumer requests that their credit card company or one of the national reporting bureaus remove a fraudulent or incorrect charge from their credit history.


Be sure to contact any of the other lenders who have information about the error on your account, including any credit bureaus involved, and alert them of the mistake so that they can update their records accordingly. According to Bankrate, if you’ve officially disputed a charge, the Fair Credit Billing Act provides you the right to withhold payment for that item until the card issuer’s investigation is complete.


You are entitled to check your credit report annually. Therefore, you should check your credit report each year to ensure you know what is on your report because what you see on your report is also a summary of what lenders will see.


How to Protect Your Credit


A 2021 survey reported that nearly 42 million consumers fell victim to identity theft costing $52 billion in losses. Identity theft can cost you money and time. To avoid identity theft, keep your personal information like your social security number and credit cards in a safe place. 


4 Ways to Protect Your Personal Information


  • Shred documents containing personal information before throwing them away.
  • Avoid using passwords containing your name, your children’s names, or the year you were born or graduated. Instead, use strong passwords for all your financial accounts, email accounts, and social media platforms.
  • Whether through call, text, or email, don’t send personal information to an unidentified person. 
  • Avoid clicking on suspicious email or text links.


Scammers try all sorts of ways to get your information. Being aware of how they work can save you time and money.


Recommended Read: How to Protect Your Email Account and Personal Information


The Money Wrap-Up


Unfortunately, being a credit ghost can do more harm than good regarding your financial security. You can obtain, maintain, and protect your credit profile by being alert and aware of your credit report. If you have questions or concerns about your credit, request more financial content, and we will be happy to give you the information you need.

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