What Is a Thin File?
A “thin file” refers to the credit report of someone with little or no credit history. Consumers who are just starting out and may never have taken out a loan or had a credit card are said to have thin files.
Key Takeaways
- A person with little or no credit history is said to have a thin file.
- Having a thin file can make it difficult to borrow money or get a regular credit card.
- One way to build a credit history is to get a secured credit card and make the payments on time.
Understanding a Thin File
Credit bureaus compile data on individual consumers’ use of credit to generate a credit report on them. That credit report, which includes information on how much the person has borrowed and whether they have paid their bills on time, is used to calculate their credit score and may be reviewed by prospective lenders to determine how creditworthy they are.
Having a thin file can make it difficult to obtain credit or be approved for a loan, because it gives lenders very little information with which to judge the person’s creditworthiness. To get around that problem, some lenders will consider other information in making their decisions.
How to Build Credit with a Thin File
If you have a thin file and want to borrow money, then you have several options. The simplest, because it relies on actions that you’ve already taken, is to ask thelenderto considerpayments that usually aren’t reported to the credit bureaus, such as utility bills and rent. If you’re applying for a home mortgage, for example,Fannie Maesays lenders can construct a nontraditionalcredit historyfor you, using a combination of yourbank statements,canceled checks, bills marked as paid, and reference letters fromcreditorsandlandlords.
Another option that requires more time and effort is to obtain acredit cardand start building a solid credit history. If you have no credit history, then the only type of card available to you may be a secured credit card. A secured credit card requires you to deposit a sum of money with the lender that will then serve as your credit line, the maximum amount that you can charge to the card.
Make sure to get a secured credit card that will report your payments to all three major credit bureaus: Equifax, Experian, and TransUnion. Also, remember to pay your bills on time. Otherwise, you’ll build a poor credit history. Finally, look for a secured card with a low or no annual fee.
After you’ve used a secured card for a while and your credit history is no longer as thin, you may be eligible to apply for a conventional credit card.
By that time, you most likely will have established a credit score as well. According to Experian, “Accounts usually need to have a minimum of three months and perhaps as much as six months of activity before they can be used to calculate a credit score.”
FAQs
6 Ways to Strengthen a Thin Credit File
- Open a Credit Card. With a limited credit history, you likely won't qualify for most credit cards. ...
- Become an Authorized User. ...
- Get a Credit-Builder Loan. ...
- Sign Up for Experian Boost. ...
- Get a Cosigner. ...
- Pay Your Bills on Time.
If you have a thin file, then the credit bureaus simply do not have enough information about your credit history to determine your personal or business credit scores. It's sometimes called being “credit invisible.”
Which of the following cards will help build your credit if your credit file is thin? ›
Apply for a secured credit card
Secured credit cards are typically easier to qualify for than traditional cards if your credit history is poor or non-existent. And, as long as you're responsible, they can help you establish good credit.
What is building your credit file? ›
Paying your debts on time, maintaining a mix of different types of accounts and keeping your balances low can all help ensure that the credit history you establish is positive.
Can I get a mortgage with a thin credit file? ›
A thin credit file can make it difficult to get approved for a mortgage, car loan or other credit products — and if you are approved, you could pay a higher interest rate.
How can I build my credit insanely fast? ›
- 1. Make On-Time Payments. ...
- Pay Down Revolving Account Balances. ...
- Don't Close Your Oldest Account. ...
- Diversify the Types of Credit You Have. ...
- Limit New Credit Applications. ...
- Dispute Inaccurate Information on Your Credit Report. ...
- Become an Authorized User.
Very Poor: 300–499. Poor: 500–600. Fair: 601–660.
What are three ways you can boost your credit score? ›
But here are some things to consider that can help almost anyone boost their credit score:
- Review your credit reports. ...
- Pay on time. ...
- Keep your credit utilization rate low. ...
- Limit applying for new accounts. ...
- Keep old accounts open.
Left unaddressed, a thin credit file could prevent you from buying a house or car, starting a business, and even qualifying for some types of student loans. Unfortunately, thin credit is fairly common. In fact, credit bureau Experian reports that nearly 20% of Americans have thin credit files.
How long does it take to build credit? ›
According to Experian®, one of the three major credit bureaus in the U.S., “You typically need three to six months of credit activity recorded there before a score can be created.”
Payment History: 35%
Your payment history carries the most weight in factors that affect your credit score, because it reveals whether you have a history of repaying funds that are loaned to you.
How to build credit score without credit card? ›
7 ways to build credit without applying and using a credit card
- Personal loan. ...
- Auto loan. ...
- Make timely rent payments. ...
- Experian Credit Boost. ...
- Credit-building debit cards. ...
- Ask to be an authorized user. ...
- Credit-building apps. ...
- How long does it take to build credit for a beginner?
Try these six steps to fatten up your thin credit file:
- Apply for a Secured Credit Card. ...
- Benefit from Someone Else's Credit History. ...
- Apply for a Credit-Builder Loan. ...
- If You Rent Your Home, Get Your Rental Account Reported to the Credit Bureaus. ...
- Don't Apply for Too Much Credit at Once. ...
- Check Your Credit Reports.
How to Raise your Credit Score by 200 Points in 30 Days?
- Be a Responsible Payer. ...
- Limit your Loan and Credit Card Applications. ...
- Lower your Credit Utilisation Rate. ...
- Raise Dispute for Inaccuracies in your Credit Report. ...
- Do not Close Old Accounts.
7 Ways to Build Credit if You Have No Credit History
- Become an authorized user.
- Try a credit-building debit card.
- Apply for a secured credit card.
- Apply for a credit-builder loan.
- Apply for a store credit card.
- Have rental payments reported.
- Establish credit with Experian Go™
How to fix a thin credit file
- Apply for a secured credit card. ...
- Take out a credit-builder loan. ...
- Become an authorized user on someone else's credit card. ...
- Enroll in a credit-boosting program. ...
- Ask for a credit limit increase. ...
- Get a cosigner. ...
- Diversify your credit mix. ...
- Take out a personal loan.
Having a thin file can make it difficult to obtain credit or be approved for a loan, because it gives lenders very little information with which to judge the person's creditworthiness. To get around that problem, some lenders will consider other information in making their decisions.
How to build a 800 credit score from scratch? ›
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
What does it mean if I have a thin file Credit Karma? ›
Having a limited file (also known as a 'thin' credit file) means that we haven't been able to find a credit report and score for you with TransUnion, the credit reference agency we use.
