Nearly one in ten American adults currently have no credit score, according to data from the Consumer Financial Protection Bureau. The agency reports that 9.8% of adults lack scores because their credit files contain insufficient information, a condition known as having a thin credit file.
Individuals with thin credit files encounter significant barriers when attempting to borrow money or lease apartments. Without established credit scores, many find themselves unable to access traditional financial products.
The CFPB's analysis identifies two primary causes for thin files. Insufficient credit occurs when credit reports lack enough payment history to calculate scores, affecting 3.9% of adults. Stale credit, affecting 5.9% of adults, happens when reported information becomes too outdated for scoring models.
Financial challenges intensify for those with thin credit during emergencies. These individuals are more likely to turn to high-cost alternatives like payday loans, which carry average annual percentage rates around 400%, compared to approximately 11% for personal loans.
Additional difficulties include trouble securing apartment leases and employment positions requiring credit checks. The problem extends beyond financial inconvenience to create substantial barriers in multiple life areas.
Certain demographic groups show higher concentrations of thin credit files. Low-income individuals face increased likelihood, as do residents of low-income neighborhoods. Black and Latino consumers experience disproportionate rates compared to white consumers.
Geographic patterns also emerge, with Southern residents more likely to have thin files than other U.S. adults. Mississippi records the highest percentage of unscorable residents among states.
Financial educators recommend several approaches to address thin credit files. Verifying credit report accuracy through free annual reports represents a first step, as errors sometimes contribute to the problem.
Becoming an authorized user on a family member's credit card can provide immediate reporting benefits without requiring card usage. For those without this option, secured credit cards from local credit unions offer another pathway.
Credit-builder loans represent specialized products designed for this situation. These loans hold funds in savings accounts while borrowers make reported monthly payments, establishing payment history before receiving the money.
Store credit cards present another possibility, though they require careful management due to typically high interest rates above 30% and potential spending increases.