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No Credit History. No Credit Score. No Credit.

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Credit Sesame discusses the reality of having no credit history, no credit score and no credit.

If you’ve ever applied for a loan or credit card, you understand the importance of having a detailed set of records that illustrates your financial history. Typically, this information comes from one of the national credit reporting agencies: Equifax, Experian or TransUnion. People who are credit invisible—more than one in 10 Americans, by one estimate— have no credit score and access to credit isn’t nearly as straightforward.

There are 26 million credit invisible people in the U.S., according to a report titled “Data Point: Credit Invisibles” from the Consumer Financial Protection Bureau (CFPB) Office of Research published in 2015—the most recent data available on the topic.

Who are credit invisible Americans? What is the impact of having no credit history and no credit score? What are the benefits of becoming credit visible?

Who is credit invisible?

The poor and historically underserved are among Americans most likely to be credit invisible, researchers note. For example, in a study titled “Credit at the Corner Store,” Princeton University researcher Vance Alan Puchalski explored informal credit systems that urban Detroit corner convenience stores manage to provide credit-invisible customers who are poor with access to interest-free financial services.

Among other insights, the bureau’s analysis of roughly 5 million credit records noted that several people groups are more likely than others to qualify as credit invisible. For example:

  • People living in low-income neighborhoods are more likely to be invisible than those in upper-income neighborhoods. Close to 30 percent of low-income consumers are considered credit invisible, with no credit score or credit history.
  • Approximately 15 percent of Black and Hispanic Americans are credit invisible, compared to just 9 percent of people who are White or Asian.
  • Age matters, too, because more credit history tends to be available the older a person gets. For example, more than 80 percent of 18- and 19-year-olds hold credit invisible status, whereas fewer than 40 percent are invisible by their early 20s.
  • Credit invisible people face numerous challenges that make it difficult to access financing that could improve their lives.

Credit invisible does not mean bad with money or past troubles with debt. In fact, a 2016 report titled “Serving the Credit-Invisible” from the National Credit Union Administration notes, “The credit invisible may actually have an excellent debt repayment history—it just hasn’t been reported.”

What is the impact of having no credit history and no credit score?

If you are credit invisible with no credit history and no credit score, you face several barriers to accessing the financial system. Experian identifies several credit invisible challenges. For example:

  • You can struggle to get a credit score. The vast majority of lenders rely on credit scores, and if you lack a six-month paper trail of credit activity, your credit report won’t contain those details, and you are unable to get a score.
  • Your credit applications require lenders to do more research. For the credit invisible, the timeline from credit application to successfully acquired loan can be long—if an application is not denied. The credit invisible frequently face the need to undergo manual underwriting, in which lenders must do additional research to find documentation that verifies whether a borrower is able to make payments.
  • Your credit options are limited, which can promote risky decisions. Because conventional lending options often are unavailable to the credit invisible, many people in this group turn to high-interest and high-risk financial instruments such as payday loans. Thus, a loan to cover a short-term emergency can become a long-term, costly problem for borrowers who are already marginalized.
  • You can face steep upfront security deposits. If you apply to rent a home or apartment, being credit invisible can count against you. For example, a landlord might end up charging higher security deposit fees without a paper trail illustrating you’re capable of paying monthly dues.

What are the benefits of being credit visible?

It is possible for most people with no credit score to become credit visible. Here are some steps you can take if you are struggling to secure credit:

  1. In its credit invisible checklist, the CFPB recommends that you start by seeing what your records actually say. You might be credit invisible, or you might have more data on file than you realize. If you haven’t already done so this year, go to AnnualCreditReport.com to pull your free credit report from the three credit reporting companies. Use this documentation in conversations with prospective lenders, and be sure to check for—and work to correct—any errors to ensure your credit file reflects your actual history. Fraudulent activity can damage your ability to secure financing so it is important to check that all credit activity is yours.
  2. Check tools available to people who are credit invisible. For example, secured credit cards match cash funds you’ve deposited in a bank account with credit. The Sesame Cash Credit Builder does just this. Over time, successful payments can give a bank confidence you’re good on your payments, opening the door to accessing a conventional credit card. You might also find store cards of interest—credit extended by the places where you shop. Credit unions offer something called a credit builder loan.
  3. Consider other approaches to documenting your ability to pay bills. For example, Sesame Rent Reporting/Turbo works directly with tenants and landlords to report monthly tent payments to TransUnion and Equifax.

If you are credit invisible, rest assured you are not alone—and there are people and resources in your corner. Exploring some of the strategies outlined above can help you assess your credit status, apply creative solutions to demonstrate your ability to pay bills and access financing to achieve your personal financial goals.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

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Published September 30, 2022
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