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A person is said to be "credit invisible" if they have no credit history or report at any of the three national credit bureaus (Experian, TransUnion and Equifax). The Consumer Financial Protection Bureau (CFPB) estimates that 26 million U.S. consumers are credit invisible—that's roughly 11% of the adult population.
Why Does Being Credit Invisible Matter?
Credit invisibility is caused by the absence of credit reports, and you may lack credit reports if you have no record of having used consumer credit—that is, you haven't borrowed or repaid money in the form of loans, credit card accounts or other types of consumer credit.
Being credit invisible can affect your day-to-day life in a number of ways, such as:
- Inability to get a credit score. Credit scores are based on the information compiled in your credit reports, so if you have no credit report, you cannot get a credit score. FICO® Scores☉ , used by 90% of top lenders, require 180 days (six months) of recorded credit activity (or "credit visibility") before they can be calculated.
- Challenges with credit applications. Many lenders use credit scores and reports to automate lending decisions. If you're credit invisible, lenders typically must evaluate your credit applications using a more time-consuming process called manual underwriting, which has a loan officer personally inspect your financial documents to gauge the likelihood that you will repay your loans. Credit reports and scores encapsulate much of the information required for underwriting, so automated loan decisions typically come much more quickly.
- Difficulty with emergency loans. Because speedy or instant credit approvals increasingly rely on credit reports and credit scores, being credit invisible may limit your options when you need to borrow money quickly. This means credit invisible individuals rely disproportionally on payday loans, auto title loans and other expensive (and sometimes predatory) lending options when they need emergency cash or credit.
- Higher security deposits. It's common for landlords to run a credit check when you apply for an apartment, and for cable companies and internet providers to do the same when you sign up for service. In each case, it helps the landlord or service provider decide whether to do business with you and, if so, how large a security deposit to charge you for an apartment or leased equipment such as a wireless modem or cable box. Credit invisibility is not the same as poor credit, of course, and it probably won't prompt a refusal to work with you, but in many cases lack of a credit history can be grounds for requiring a hefty security deposit.
How to Go From Credit Invisible to Credit Visible
It's a classic conundrum: How can you establish a record of credit payments when a lack of credit history makes it difficult to borrow money? People have tackled this problem for generations and, fortunately, there are some tried-and-true strategies for getting credit visible:
- Become an authorized user on a friend's or family member's credit card. As an authorized user on someone else's account, you get your own card but share in the primary account holder's borrowing limit and payment history. As long as the account is managed responsibly—meaning no late payments or maxed out balances—its positive payment record will appear on your credit reports and potentially improve your credit scores.
- Enroll in Experian Boost®ø. This free service lets you use your history making utility, cellphone and streaming service payments to establish an Experian credit report. While it won't make you visible to the other national credit bureaus, Boost could open you up to offers from lenders. That includes the personalized offers for credit cards based on your credit profile accessible through Experian CreditMatch™.
- Apply for a secured credit card. With a secured credit card, you put down cash as collateral, and the amount of your deposit typically becomes your credit limit. Paying on time as agreed each month will establish a positive payment history at the national credit bureaus, which will remedy your credit invisibility and put you on track for good credit scores.
- Seek a credit-builder loan. Available through many credit unions, these specialized loans are designed to help the credit invisible and those with damaged credit establish good payment records and save some money in the bargain. With a credit-builder loan, you borrow a small amount—typically less than $1,000—but instead of turning the cash over to you, the lender places it in an account you cannot access. (If you fail to make your loan payments as agreed, the lender can keep the loan amount.) After you pay off the loan in a series of monthly payments (typically lasting no more than one year), the savings account, possibly including any accrued interest, is turned over to you—and your payments are recorded in your credit reports at the national bureaus, thus making you "credit visible." If you're considering a credit-builder loan, be sure the lender reports payments to the credit bureaus; not all do.
The disadvantages of credit invisibility are numerous, but with a little effort, it's possible to "be seen" and reap the benefits of greater access to credit. To keep tabs on your progress establishing your credit, create an Experian account to see your credit report and score for free, or download the Experian app.