Are You One of the Credit Invisible?

According to the Consumer Financial Protection Bureau, around 45 million consumers in the United States are “credit invisibles”—people who do not have scorable credit records. It’s a financial state that can make it more difficult to do things such as get loans, qualify for affordable car insurance, or even get a job. Discover more about the credit invisible below and whether you’re one of them.

In This Piece

• What does credit invisible mean?
• Are you credit invisible?
• The downsides of being credit invisible?
• Credit invisible vs. credit unscorable
• How to start building credit

What Does Credit Invisible Mean?

Credit invisible simply means not having a credit history with one of the three major credit bureaus. Those bureaus are TransUnion, Equifax, and Experian. 

If you don’t have a credit history with one of those organizations, you likely don’t have a credit report. That means when lenders go to check your credit to evaluate you for a loan, they can’t see anything about you. You’re invisible to them with regard to credit.

Are You Credit Invisible?

Answer the questions below to find out if you might be a credit invisible.

Have you ever applied for credit?	Yes	No
Do you have a current credit card in your name?	Yes	No
Have you had a credit card in your name in the past 7 years?	Yes	No
Do you have a current loan of any type in your name, such as a personal loan, car loan, or mortgage?	Yes	No
Have you had a loan in your name in the past 7 years?	Yes	No
Are you an authorized user on a credit card for someone else?	Yes	No
Do you use a credit building service to have rent, car insurance, or other payments reported to your credit file?	Yes	No

If you answered no to all of the above questions, you’re probably credit invisible. You might also be credit invisible if you can answer yes to only one or two of those questions.

The Downsides of Being a Credit Invisible

Being credit invisible might sound cool, but it can actually be a major hassle. Businesses of all types use credit histories and scores to evaluate you as a borrower, customer, or employee, and if you don’t have any credit history to look at, that makes you a complete mystery to them.

Businesses don’t like mysteries. If they can’t learn anything about you, they can’t make an appropriate risk assessment on doing business with you—which means they might not want to lend you money or offer you services. Here are just some ways being credit invisible can make life difficult:

• You may not be able to access loans and credit. That could leave you unable to get a credit card, car loan, personal loan, or mortgage. If you are able to get financing, you may end up paying a lot more in interest for it.
• You might have a hard time renting. Landlords often look at credit reports and scores to determine if you’ll be a responsible tenant who pays the rent on time. If you’re credit invisible, that could leave you with less desirable rental options.
• You might pay more for services such as car insurance. Auto insurance providers use credit scores as one way of determining a driver’s risk. Other service providers, such as cell phone and utility providers, may charge you a higher deposit to make up for any potential risk that you won’t pay your bills.
• You might not be able to get certain jobs. Some employers, particularly those in the financial niches, do a credit check before hiring. No credit history at all may not cause you to lose the opportunity, but it could be a questionable mark on your application.

Credit Invisible Versus Credit Unscorable

Being credit invisible isn’t the same thing as being credit unscorable. Someone who is credit unscorable has a credit history. It just doesn’t contain enough information for the credit scoring models to calculate a score.

Two main reasons exist for being credit unscorable. The first is having a thin file. This means you don’t have enough credit history for the scoring models to work. Around 62 million people in the US have thin credit files. Often, they’re young people just starting out with building their credit.

Another common reason for being credit unscorable is having a stale credit file. This means someone has a credit history, but there’s nothing recent on it. That makes it hard for the scoring models to arrive at a credit score for that person. FICO considers credit files with no activity in over six months as stale.

How Do You Start to Build Credit?

If you’re not sure if you’re a credit invisible or someone who simply has an unscorable credit file, no worries. The actions you need to take to build your credit so you can get a credit score—and hopefully a good one—are the same. 

Here are some of the things you can do to start building credit and become credit visible.

• Sign up for ExtraCredit and use the Build It feature. A great way to build credit history is by reporting the bills you’re already paying on time. Rent and utility payments don’t normally get reported to the credit bureaus. But you can sign up for a service such as ExtraCredit, which adds those as new tradelines on your credit reports. 
• Apply for a credit-building loan. Credit-builder loans are designed for people with poor or no credit, so you don’t need a credit score to get approved for one. Look for lenders that report to all three credit bureaus so you can use the credit-building loan to build a credit file with all of them at one time.
• Apply for a secured credit card. Secured credit cards require a deposit to secure your line of credit—often around $250 to $300—and they don’t require good credit. Again, you want to look for a card company that reports to all three credit bureaus so you can build your credit files across the board.
• Become an authorized user on someone’s credit card. You don’t need your own credit card to build credit. If you’re an authorized user on someone else’s account and that company reports activity on the credit reports of authorized users too, you can score a bit of credit history.
• Get a cosigner for a loan. You might need a loan to help pay for college or buy a car so you can get to work. If someone with a good credit history agrees to cosign for the loan, you have a better chance at getting it. That loan can then help you build good credit for the future.

Once You Build Good Credit, Keep It

It takes work to build good credit, so make sure you take steps to keep it. That includes managing finances responsibly and making all your bill payments on time. You might also keep tabs on your credit report and score with a service like ExtraCredit. That way, if you see a mistake that could harm the good credit you worked hard for, you can challenge the error quickly.

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