“I’ve never missed a payment in my life. I pay my rent on time, cover my bills early, have no loans, and keep my finances clean. Yet somehow, I’m “not trustworthy” enough for a decent credit score. Like… what? How does that even make sense?
It blows my mind how the system works. You can be completely financially responsible, but if you don’t have a credit card or loan history, you basically don’t exist to lenders. It’s wild how being debt-free doesn’t mean you have good credit; it means you have no credit. The logic feels so backwards.
I tried applying for a new apartment recently, and the leasing office straight-up told me my “thin credit file” was an issue. I literally had to explain that I’ve never missed a payment because I don’t use credit cards. The lady smiled and said, “Yeah, that’s the problem.” Like… how do you fix that without falling into the trap of borrowing money to prove you can pay it back?”
This is a post from the Reddit community r/Adulting about how the whole credit score system feels like a scam. If you haven’t taken out a loan before, it doesn’t automatically mean you have a good credit score. The system is built around you taking out loans and paying them back. The more consistent you are, the better your score becomes.
So how did we get here?
Before credit scoring, lending decisions were largely based on local reputation, race, gender, marital status, and gut feelings. There was nothing like a universal database of credit scores. If I knew your parents, I might as well give you a loan based on that because I believed you were going to pay it back. You could walk into a bank and get a loan just because the bank manager knew you were a government worker. There was no universal data available;
People just gave out loans based on the information they had about the other person.
While the system sounds logical, it was extremely flawed because it only worked locally, where you were more familiar with people. It didn’t work well across geographical boundaries. A person in New York might want to lend money to another person in Arizona, but they couldn’t because of information asymmetry. They didn’t know enough about this person to feel they were worthy of a loan. Also, when humans are involved, there’s always room for imperfection, so a person might not know someone and still lie about whether they did.
In the 1950s, the foundation for credit scoring was laid by the company that is now one of the most important names in consumer credit scoring: FICO. When it comes to consumers checking their credit scores, its main objective was to remove human bias and gut-feeling errors from lending. They introduced one of the first general-purpose credit scoring systems to lenders. Over the decades, lenders slowly adopted these scores as their standard for anyone who wanted to take out a loan.
With credit scores, lenders could see information about their borrowers:
- Your past loans
- Your repayment history
- Your credit utilization
- Your credit history length, etc.
All this is summed up in a universal number that a lender can use to judge your financial situation. It goes as low as 300 and as high as 850, with every number having its own hierarchy and meaning.
Both standard FICO and VantageScore models span from a low of 300 to a high of 850. Using the most common FICO ranges, those numbers break down into tiers:
- 300–579, Poor: indicates a heavy history of missed payments, defaults, or severe delinquencies. Lenders will generally deny loans or charge very high interest rates.
- 580–669, Fair: shows some past credit issues, but you can usually qualify for basic loans, though often with higher-than-average rates.
- 670–739, Good: considered a dependable, average score. Lenders view you as an acceptable risk and will readily approve standard credit products.
- 740–799, Very Good: signifies a strong financial track record. You qualify for better-than-average interest rates and terms.
- 800–850, Exceptional: the highest tier. You represent the lowest possible statistical risk to lenders and get access to the absolute best interest rates and premium rewards products.
Higher scores mean lower risk, and better rates and terms; lower scores mean higher risk, and fewer options. Your credit score helps lenders estimate the risk of lending you money, and a higher score can save you thousands over time.
Since their inception, credit scores have scaled massively, with lenders pulling billions of credit scores annually. As the market grows aggressively every day, it’s projected to reach $36.41 billion by 2029, nearly doubling from its 2024 level.
Credit scores have revolutionized how credit works since their inception:
Speed of capital: Manual underwriting used to take weeks to compile your credit information because everything had to be done manually from the ground up. With credit scores, it takes seconds. Once you have a credit score, lenders can verify your creditworthiness as quickly as possible.
Enabled mass-market consumer credit: Before credit scoring, credit access was often limited, and lenders relied heavily on personal knowledge and judgment. With credit scores, more people with average credit profiles could access credit, enabling banks and fintechs to scale their lending to millions of people without constantly watching their backs.
Standardized risk globally: Credit scoring created a standardized way to assess risk, allowing lenders to evaluate borrowers they had never met before.
While credit scores are one of the reasons the lending sector has scaled up, thanks to the ease of assessing borrowers’ creditworthiness instead of manually reviewing applications or giving loans based on gut feelings, the system has a lot of flaws that make it increasingly outdated over the years.
Firstly, credit scores don’t travel. They operate in national silos. So, if I have decades of credit information in Asia and arrive in the USA to start a new life, that credit information is basically useless because the USA uses its own credit scoring system and doesn’t automatically recognize whatever system was used in Asia. I have to start building my credit history from scratch to access credit in another country.
In the age of the internet, many people are earning online, but credit scores only contain information about your credit history. This means entire segments of users are being ruled out because they are seen as ineligible for credit.
Most freelancers end up with little or no credit history. Millions of people are financially active but credit-invisible because the world has changed over the decades, while the credit engines used to underwrite everyone are still operating on outdated principles.
Home Loan rejected due to being freelancer, what can I do?
I have a home loan with Bajaj Housing Finance, however they are charging interest at 8.25%... I tried for a lower rate with Canara bank the manager and agent told me that they will give me the loan, they took 3 months to process the whole things and now say it is rejected.
Backstory: I took a loan for 35L in 2024 at 8.75% interest my credit score at that time was 780... After rate cuts from RBI bajaj did not cut the interest so much so I was looking for some other bank... Applied for loan through canara, they said interest would be 7.5% asked me to do all processing, asked me to even open a bank account with them stating that "otherwise loan would not be processed".
Bare in mind my income is 15-20L as a freelancer, I have given them my ITR statements, My Payment reciepts, bank statements.. I have even given them my ITR login as a part of 'verification'. I gave them UDYAM certificate however they still say they dont consider freelancing as a legit business.
Someone can have years of consistent income and responsible financial behavior while still looking like a stranger to a traditional lender because traditional finance doesn’t care enough about your income. Instead, it’s largely focused on how well you’ve repaid credit in the past.
This is exactly what we are working to solve at @Cr3dentials: building a globally available credit score, not just in one country, while also focusing on people who earn across the internet.
When lenders don’t have much information about borrowers due to the limited information provided by credit bureaus, they tend to reject them or offer smaller loans instead. This means many people can’t access credit despite having consistent cash flow.
These are the people we are building for. We tend to go deeper into the borrower’s daily life: what they do every day, how consistently they get paid, any upcoming payments, how long they’ve been freelancing, how often they get paid, etc.
We don’t just focus on credit. We focus on the source of the money borrowers will use to pay back their loans in the first place.
We tried to incorporate as much data as we could get. We integrated credit bureau data to access people’s credit information and neobank user data to understand more about the people we’re underwriting, among other data sources.
The goal is to get a more complete picture of each user before underwriting them instead of relying on just one data point, like credit bureau data.
Combined with this, we also incorporate other components into our underwriting engine to make it battle-tested and improve our judgment when assessing borrowers. For instance, we also handle repayment, recourse, and even enforcement.
We already integrate with many platforms where people earn online, like Upwork, Stripe, Uber, YouTube, and Shopify, with more integrations expected in the future.
The end goal is to give credit to people traditional finance has neglected over the years, not because they’re lazy or have no cash flow, but because there are flaws in the underwriting system.
We are leading a new revolution.
If you’re building unsecured credit using stablecoin rails,
We want to work with you.
DM us 🫵