Being credit invisible sounds eerie—dystopian even. It simply means that you have little to no credit history. Lenders don’t know who you are. You can’t apply for a mortgage because your payment history isn’t being tracked by a nationwide credit reporting agency (NCRA). And that makes you the equivalent of that cool, mysterious loner at school—only much, much more broke—because who’s going to trust a credit ghost to pay them back?
While you might have a spotless payment record, it isn’t worth much if one of the big three NCRAs (Equifax, Experian, and TransUnion) can’t confirm your payment history. According to a 2015 report by the Consumer Finance Protection Bureau (CFPB), about 26 million Americans are credit invisible. An additional 19 million consumers have credit files that are “unscorable”. This means that about 45 million people in the United States—close to 14%—don’t have access to credit. However, the reality is that that number is likely much higher, around 20%.
So in a country that runs its economy by borrowing money, about 1 in 5 people can’t borrow a single cent.
While some people don’t trust banks or are scared of getting into debt, there are other factors that keep people from having actual credit scores. Some people might simply use credit too infrequently, and their credit files may have gone stale. Others simply have credit files that are too thin. In other words, their files don’t contain enough reliable information for lenders to be able to judge if a borrower is capable of paying them back.
Another often overlooked factor that can cause credit invisibility is immigration. Since Equifax, Experian, and TransUnion only report credit activity within the US—people who move to the US have to start from square one.
About 53% of Miami-Dade county is foreign born, so it’s likely that many people have had to build their credit scores entirely from scratch. Another contributing factor that gets in the way of building credit coming from another country is the length of someone's credit account history (this has a 15% impact on your credit score). While starting over is hard, if you have the proper tools, you can have a viable credit score within 30 to 60 days.
Demographically speaking, southern states and communities of color have higher rates of credit invisibility. In the Miami-Fort Lauderdale-West Palm Beach region, there are about 4.5 million adults. About 443,659 of them are credit invisible, 194,771 have thin files, and 186,612 people have stale files. That’s a total of 824,612 (or 18.1% of ) adults living in South Florida who have little to no credit history.
With mortgage rates lower than they’ve been in years, this an absolute tragedy for the thousands of potential homeowners out there. But beyond that, when you’re credit invisible, you’re vulnerable. Without a credit score, you can’t buy a car, get pre-approved for credit extensions, or buy a home. In some cases, you can’t even rent. It puts your life on pause, and completely blocks off access to credit that could soften the impact of costly, unpredictable life events.
Be Seen by Credit Bureaus
So, what should you do if you don’t have a credit score, and you need to build one up fast?
For those who are worried about getting into debt or who would like to start off slow, a secured credit card is your best bet. These cards have low limits, and can give you access to anywhere from $250 to $500. You’ll need to make a cash deposit in the amount of the card limit, since the deposit you’ve made will cover the cost of the card in the case that you can't pay it back.
Make sure that the secured credit card you’ve chosen will allow you to apply for an unsecured line of credit once you’ve proven that you can make payments on time.
Even though many times you’ll see that banks allow you to pay your credit card balance on the 15th of every month—make sure to pay it sooner. That way, when NCRAs go to report your activity, they’ll have your most up to date credit card activity, rather than reporting that you still owe $150 on the 9th of the month, when you were going to pay it off on the 14th of the month. It's a nice shortcut to make sure that you're getting the most out of an NCRAs attention towards your credit activity.
People have a tendency of looking at credit cards as if they’re supposed to be used for unnecessary expenses: eating out, shopping for fancy clothes, etc. The truth is that credit bureaus want to see how well you make payments on time to see whether or not they can trust you with large, everyday purchases such as homes, appliances, cars, and personal loans.
Moral of the story: don’t live above your means.
Even though it's the largest monthly expense anyone ever has to deal with, people rarely report their positive rental payment history. If you sign up with a third party provider who reports your positive rental payment history to NCRAs, you could start building credit and also build up a good reputation that could help you get ready to buy a home.
The last thing you want to do is make a monthly habit of checking your credit reports. You can receive a free annual report from all three credit bureaus by visiting www.annualcreditreport.com.
A good reason for checking your credit reports is to make sure that there isn’t any information on there that was reported incorrectly. Incorrect information can be tacked onto your credit reports without you even knowing it. These mixups can cause unnecessary drops in your score, so don't risk it.
Removing negative accounts from your credit history or other incorrect information can substantially boost your score.
The numbers to call in case you need to correct information with one of the three NCRAs are:
Equifax: 1 (888) 548-7878
Experian: 1 (888) 397-3742
TransUnion: 1 (800) 916-8800
You may feel pressed for time and want to build up your credit score as quickly as possible. Just remember that at the end of the day, what lenders and credit bureaus want to see is consistency.