diff --git a/selfservice/strategy/password/registration.go b/selfservice/strategy/password/registration.go
index c3195a1305d7..b94270df9507 100644
--- a/selfservice/strategy/password/registration.go
+++ b/selfservice/strategy/password/registration.go
@@ -136,16 +136,16 @@ func (s *Strategy) validateCredentials(ctx context.Context, i *identity.Identity
 		// This should never happen
 		return errors.WithStack(x.PseudoPanic.WithReasonf("identity object did not provide the %s CredentialType unexpectedly", identity.CredentialsTypePassword))
 	} else if len(c.Identifiers) == 0 {
-		return schema.NewMissingIdentifierError()
-	}
-
-	// Sometimes, no identifier is set, but we still want to validate the password!
-	ids := c.Identifiers
-	if len(ids) == 0 {
-		ids = []string{""}
+		if err := s.d.PasswordValidator().Validate(ctx, "", pw); err != nil {
+			if _, ok := errorsx.Cause(err).(*herodot.DefaultError); ok {
+				return err
+			}
+			return schema.NewPasswordPolicyViolationError("#/password", err.Error())
+		}
+		return nil
 	}
 
-	for _, id := range ids {
+	for _, id := range c.Identifiers {
 		if err := s.d.PasswordValidator().Validate(ctx, id, pw); err != nil {
 			if _, ok := errorsx.Cause(err).(*herodot.DefaultError); ok {
 				return err
diff --git a/selfservice/strategy/password/settings.go b/selfservice/strategy/password/settings.go
index ee0c1f3e41dd..9b9018a9f834 100644
--- a/selfservice/strategy/password/settings.go
+++ b/selfservice/strategy/password/settings.go
@@ -141,7 +141,6 @@ func (s *Strategy) continueSettingsFlow(
 	}
 
 	ctxUpdate.UpdateIdentity(i)
-
 	return nil
 }
 
diff --git a/selfservice/strategy/password/settings_test.go b/selfservice/strategy/password/settings_test.go
index 5097798ae0f1..ea7c151943e2 100644
--- a/selfservice/strategy/password/settings_test.go
+++ b/selfservice/strategy/password/settings_test.go
@@ -59,6 +59,15 @@ func newEmptyIdentity() *identity.Identity {
 	}
 }
 
+func newIdentityWithoutCredentials(email string) *identity.Identity {
+	return &identity.Identity{
+		ID:       x.NewUUID(),
+		State:    identity.StateActive,
+		Traits:   identity.Traits(`{"email":"` + email + `"}`),
+		SchemaID: config.DefaultIdentityTraitsSchemaID,
+	}
+}
+
 func TestSettings(t *testing.T) {
 	conf, reg := internal.NewFastRegistryWithMocks(t)
 	conf.MustSet(config.ViperKeySelfServiceBrowserDefaultReturnTo, "https://www.ory.sh/")
@@ -321,6 +330,7 @@ func TestSettings(t *testing.T) {
 	}
 
 	t.Run("description=should update the password even if no password was set before", func(t *testing.T) {
+		email := fmt.Sprintf("test+%s@ory.sh", x.NewUUID())
 		var check = func(t *testing.T, actual string, id *identity.Identity) {
 			assert.Equal(t, "success", gjson.Get(actual, "state").String(), "%s", actual)
 			assert.Empty(t, gjson.Get(actual, "ui.nodes.#(name==password).attributes.value").String(), "%s", actual)
@@ -330,7 +340,7 @@ func TestSettings(t *testing.T) {
 			cfg := string(actualIdentity.Credentials[identity.CredentialsTypePassword].Config)
 			assert.Contains(t, cfg, "hashed_password", "%+v", actualIdentity.Credentials)
 			require.Len(t, actualIdentity.Credentials[identity.CredentialsTypePassword].Identifiers, 1)
-			assert.Contains(t, actualIdentity.Credentials[identity.CredentialsTypePassword].Identifiers[0], "-4")
+			assert.Equal(t, email, actualIdentity.Credentials[identity.CredentialsTypePassword].Identifiers[0])
 		}
 
 		var payload = func(v url.Values) {
@@ -338,19 +348,23 @@ func TestSettings(t *testing.T) {
 			v.Set("password", randx.MustString(16, randx.AlphaNum))
 		}
 
+		id := newIdentityWithoutCredentials(email)
+		browserUser := testhelpers.NewHTTPClientWithIdentitySessionCookie(t, reg, id)
+		apiUser := testhelpers.NewHTTPClientWithIdentitySessionToken(t, reg, id)
+
 		t.Run("type=api", func(t *testing.T) {
-			actual := expectSuccess(t, true, false, apiUser2, payload)
-			check(t, actual, apiIdentity2)
+			actual := expectSuccess(t, true, false, apiUser, payload)
+			check(t, actual, id)
 		})
 
 		t.Run("type=spa", func(t *testing.T) {
-			actual := expectSuccess(t, false, true, browserUser2, payload)
-			check(t, actual, browserIdentity2)
+			actual := expectSuccess(t, false, true, browserUser, payload)
+			check(t, actual, id)
 		})
 
 		t.Run("type=browser", func(t *testing.T) {
-			actual := expectSuccess(t, false, false, browserUser2, payload)
-			check(t, actual, browserIdentity2)
+			actual := expectSuccess(t, false, false, browserUser, payload)
+			check(t, actual, id)
 		})
 	})
 
diff --git a/selfservice/strategy/password/validator.go b/selfservice/strategy/password/validator.go
index 09d02960dd71..ad8088b05801 100644
--- a/selfservice/strategy/password/validator.go
+++ b/selfservice/strategy/password/validator.go
@@ -149,7 +149,7 @@ func (s *DefaultPasswordValidator) Validate(ctx context.Context, identifier, pas
 		return errors.Errorf("password length must be at least %d characters but only got %d", passwordPolicyConfig.MinPasswordLength, len(password))
 	}
 
-	if passwordPolicyConfig.IdentifierSimilarityCheckEnabled {
+	if passwordPolicyConfig.IdentifierSimilarityCheckEnabled && len(identifier) > 0 {
 		compIdentifier, compPassword := strings.ToLower(identifier), strings.ToLower(password)
 		dist := levenshtein.Distance(compIdentifier, compPassword)
 		lcs := float32(lcsLength(compIdentifier, compPassword)) / float32(len(compPassword))