like the payment record from a book or record club

Another option is to get a relative or very close friend to add you as an authorized user on their credit account in good standing. This takes a while longer to establish a history, but it can be very effective. The account holder can either give you access to the account or not, but as long as that account is kept up to date, it will reflect on your future credit history.

If you have some credit history but not much (known as a "thin file"), you might benefit from a lender using a FICO Expansion score. Scaled like a regular FICO score (from 300 to 850), the formula is designed so that the lender can incorporate additional information that might not be in a traditional credit file. For an Expansion score, Fair Isaac will go to "boutique credit repositories" that may have data not traditionally reported (like the payment record from a book or record club), says Watts. The company might also look at how often you use checks or how often you have to access overdraft protection. In addition, if lenders can obtain additional information (like rental payment history or utility payment history), that can also be factored into the formula.

"It's going to help the people with no credit and it could also help the people with poor credit," Garkey says. Curtis Arnold, founder of CardRatings.com, agrees. "I think it's a positive thing. With rental histories and power bills you've proven that you can pay your bills."

A relatively new addition to the credit-scoring universe is the VantageScore -- introduced as a joint effort by Equifax, Experian and TransUnion -- which rivals the FICO score but so far is being used by very few lenders. The VantageScore, which ranges from 500 to 990 and includes A to F ratings as well, is being promoted as paying particular attention to "thin" credit files.

People without credit are "a large segment of our society," says Arnold. "And the risk is that they are not being judged fairly."

Breaking in

Breaking in
Living with no credit can be severely limiting, but there are ways to get into the credit system. Some lenders "will try to work with you," says Sweet. "But what it means is much more work for you." And that could include digging up proof of rental payments, old power bills and the like.

One good option: join a credit union. Because of the relationship that is established, it's easier to get help accessing traditional credit options -- and advice on entering the credit game, says Garkey.

Another option: get a secured credit card to start building up a positive credit history. The way it works: You apply for a card and make a deposit that will be equal to your credit limit. You use the card and pay the monthly bills, and the lender keeps your deposit for the life of the card. If all goes well, the lender may issue you a regular credit card after you've established a record of good payment. Then you'll get your deposit back. Consumers sometimes feel a social stigma about having a secured card, says Arnold. But that's totally unnecessary, he says. "The only people who know the card is secured is you and your bank," he says. It reports to the credit bureaus "just like a normal credit card," he adds.

The real cost of no credit

Credit histories were originally developed as financial tools to help lenders (usually for mortgages and credit cards) assess whether consumers would pay their debts. Today, credit histories are being used as a screening tool for everything from jobs to insurance rates. Little, no or poor credit can make it more difficult -- and in some cases impossible -- to get a home, car or even some jobs.

But the biggest cost is financial. Life costs more when you can't access credit. It's also harder to do the things most consumers take for granted, like driving to work or throwing in a load of laundry. Without access to normal credit, people either do without items like cars, washing machines and furniture until they can save enough to pay cash, or they obtain them at higher-than-normal rates. Those who can't pay cash or talk a lender into taking a chance on them sometimes turn to businesses that charge higher-than-retail prices for furniture and electronics, and lenders who offer high interest rates for payday, car tag loans or auto loans.

And it's a tossup whether no loan or one with a higher interest rate is the worse option for consumers, says Janet Garkey of the Credit Union National Association for Personal Finance. The difference in the rate on a $100,000, 30-year, fixed-rate mortgage for someone with a 520 (poor) score and a consumer with a 720 (borderline good) is 3.45%, says Garkey. That translates to $235 per month in payments and $85,000 over the life of the loan.