How To Fix A Thin Credit File And Why You Should
There is more than good or bad credit. There is also something called a thin credit. You can and should fix a thin credit file.
Even those who know a lot about credit reports and credit scores may be unfamiliar with the term “thin credit file.” A thin credit file can make it challenging to rent an apartment, buy a home or a car, borrow money for educational expenses, or to start a business. We’ll explain what a thin credit file is, what a thin credit file score looks like, why you have thin credit, and how to fix a thin credit file.
What is a thin credit file?
A thin credit file is a lack of credit history. Your credit file makes up your credit report and includes things like:
Number of credit accounts
Types of accounts (revolving or installment)
Account balances
Payment history
Negative marks (late payments, missed payments, bankruptcy, judgments, liens)
This information is compiled by credit bureaus and turned into a number, your credit score. Potential lenders use this information to determine if you’re a reasonable credit risk when deciding to extend credit or loan money.
What is a thin credit file score?
A thin credit file won’t have a credit score; there isn’t enough information to calculate one. But typically, a thin file has five or fewer credit accounts. The good news is that having a thin credit file is better than having a bad credit score.
A thin credit file just means a lack of credit history, while a bad credit score means a person has or is currently handling credit accounts poorly. Nevertheless, things like getting a mortgage with a thin credit file are challenging.
Why you have a thin credit file
Newly arrived immigrants, young people, and people who, for whatever reasons, prefer to strictly use cash will have thin credit files. These groups likely have fewer than five credit accounts, and if they do have accounts, the accounts are less than six months old. Credit bureaus generally require payment activity for the past three to six months to start a credit file.
For those new to the United States, any credit history you had in your home country sadly doesn’t transfer to the U.S., so you’ll be starting from scratch.
How to thicken a thin credit file
Building a credit file and a healthy credit score is not difficult. In fact, you can start right now:
Open a credit card
Open a secured credit card
Take out a credit builder loan
Become an authorized user on another person’s credit card
Pay your bills on time. This is the most significant factor in your credit score
Keep utilization (how much credit you’re using compared to how much you have) under 30%
Have a mix of credit, revolving (credit cards), and installment (loans)
Partner with Upwardli
At Upwardli, we understand the unique challenges newly arrived immigrants face when navigating the American financial. That’s why we’ve partnered with financial service providers that understand newcomers' position; lack of credit history, no Social Security number, and who offer services and products for those circumstances. So partner with Upwardli, and you’ll have a guide to the American financial landscape!
