A recent article in the New York Times, reports that "about 26 million Americans lack a credit file." Ann Carrns continues by adding that these "credit invisible" consumers...lack any credit history with the major nationwide credit reporting agencies, which tends to shut them out of the economic mainstream. These findings are according to a report issued on May 5, 2015 by the Consumer Financial Protection Bureau."An additional 19 million Americans, or 8 percent of adults, have some credit history, but not enough to create a score. Eighty percent of adults, or about 189 million people, have credit scores."A Quick Recap About Credit ScoresA credit score is essentially used to assess how likely it is that a borrower will repay a loan. The score measures the relative degree of risk that a potential person represents to a lender or investor and is based on several areas of information. Fair, Isaac Credit Bureau scores range between 300 to 850 points - the higher the score, the less risk associated with the borrower. Below are the three national credit data repositories that contribute to your score:
So Why Is Not Having Credit (aka Credit Invisible) a Bad Thing?According to the New York Times article - "When people lack a credit score, the impact on their lives can be “profound,” said Richard Cordray, the bureau’s director, in a call with reporters. Their lack of credit history can bar them from getting an education, starting a business or buying a house. “It can preclude them from accessing credit,” he said, “ and taking advantage of certain opportunities.”If you don't have any credit card or loan activity, there's no information to create a score. Not having credit doesn't automatically mean you are low risk. It can actually signify that you have no experience managing credit and this can translate as a higher risk for banks and financial institutions.What Can I Do if I'm "Credit Invisible?"First we suggest that you check out this post on what contributes to a Credit Bureau Score so you can familiarize yourself with what factors are important. We also recommend talking with a financial professional to find the best ways to establish your credit safely and effectively.It's important that you understand how to successfully manage credit so you don't need to repair your credit down the road.Read the entire original New York Times article here »
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