What is a Thin Credit File
Thin Credit
What does it mean when a funding institution denies you for "weak credit" or "thin credit file"?
Having a thin credit file can make it harder to qualify for credit and services when you need them. Even if you are approved, a thin file can keep you from getting the best rates and terms available. Here's what you need to know about thin credit files and how building a robust, positive credit history can help you.
A thin credit file typically refers to a credit history with fewer than five credit accounts on a credit report maintained by one of the three national credit reporting companies: Experian, TransUnion and Equifax. Approximately 62 million Americans have a thin file, according to an Experian report.
Most credit scoring models need at least one or two active credit accounts on a credit report to generate a credit score. They also typically require payment activity for three to six consecutive months. If you have a thin file, a lender may not be able to obtain a credit score when considering your application. Lenders and service providers may request a larger down payment or offer credit at a higher interest rate as a result of not being able to assess risk using a score. In some cases, the lender may choose to decline the application altogether.
Who Is Most Likely to Have a Thin Credit File?
You may have a thin file if you:
-Are young, since you may lack a credit history
-Are new to the U.S., since credit scores and credit histories don't transfer from other countries
-Haven't used credit in a long time, such as credit cards or loans
-Have very few credit accounts or accounts that have not been active recently
-Generally pay with cash and choose not to use credit often
How a Thin File Affects You
A thin credit file can make it more difficult to access new credit when you need it, including the ability to:
-Get approved for a mortgage loan, car loan or personal loan with favorable rates and terms
-Obtain a credit card account
-Qualify for an apartment or rental home
-Open a cellphone or other utility account
-Be offered the best rates on auto insurance
-Qualify for in-store financing of purchases
Most lenders in the U.S. rely on the information in your credit history to help them obtain or calculate a credit score and assist them in the decision-making process. If you have little to no recent history managing credit accounts, a lender may feel they are unable to accurately assess the risk of approving the credit you are requesting.
As a result, a consumer with a thin credit file could be denied credit altogether, or possibly only get access to a loan or credit card at very high interest rates, which can make borrowing money much more costly.
How to Improve a Thin Credit File
Consumers with thin credit files may feel like they're stuck in an impossible Catch-22 situation: To fatten up a thin credit file, you must have access to credit – but it's difficult to get access to credit when you have a thin file.
But all is not lost. It is possible to build and improve your credit file. Just like going from having no muscles to being a bodybuilder, or at least getting into better shape, it takes time to beef up a credit file. Here are a few ways you can begin building a robust credit history:
1. Experian Boost
Experian Boost can help thicken your Experian credit file by giving you credit for phone, utility and streaming service bills you're already paying. The service is completely free and can boost your credit scores fast by using your own positive payment history.
Contact Experian for this service.
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2. Authorized User Account
Ask a close friend or family member to add you as an authorized user. As an authorized user on a credit card account, you can benefit from the primary cardholder's positive credit history. You can use the account to make purchases, but you are not responsible for making the payments.
Not all lenders report their authorized-user accounts to the credit reporting companies, so check with the lender before requesting to be added to the account.
Contact your friend's (or your family members's) credit card company for details.
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3. Report Your Rent to the Credit Bureaus
Rent Reporters can build your credit by reporting your rent.
For thousands of Rent Reporters’ customers, the average increase is 40 points. While we would love to be able to predict a specific score we simply can’t because the scoring algorithm the bureaus use is proprietary and not available to us. We do think you’ll be inspired by the stories of our customers and the dramatic changes they have experienced.
There are 4 steps to reporting your rent to the credit bureaus.
- Verification of your identity and rent payments
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- Verification of your rent payments with your landlord
- Reporting your history to the credit bureaus
- Rental tradeline added to your credit report
As you continue to pay your rent each month, additional positive history is added to your tradeline.
Let me know if you are interested in this and I will send you the details.
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4. Self Lender Credit Builder Account
Savings plans start at $25/month and includes credit monitoring
Featuring . . .
- No hard credit pull
- No credit history required
- Reports to all 3 credit bureaus. No hard credit pull and no credit history required
- Self Lender helps you get a small loan that you save in a CD for 12 or 24 months
- At the end of account term you've built credit history and your CD savings unlocks
Let me know if you are interested in this and I will send you the details.
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5. Surge Mastercard Credit Card
Special Offer: Up to $1,000 credit limit doubles up to $2,000! (Simply make your first 6 monthly minimum payments on time)
All credit types welcome!
Let me know if you are interested in this and I will send you the details.
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NOTE: You can do all of the above credit builder steps at the same time!
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The Bottom Line
Fattening up a thin credit file may help you obtain financing and other services you need. But adding accounts to your credit report is only the first step.
The most important factor in building a positive credit history and good credit scores is to manage your credit accounts responsibly. Do so by always paying your bills on time, keeping credit card balances low and applying for credit only when you need it.
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Cheers!
Steve
Steve Downing
Clearsailing Financial
Clearwater Beach, Florida
We Lend Nationwide: Across the USA
Personal Message: https://form.jotform.com/90780471630153
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