Are You Credit Invisible?

Do you have a credit history? If you're not planning to borrow money, perhaps you think it's not important. Well, your credit history can affect your finances even when you're not borrowing money! Insurance companies, perspective employers (for some types of jobs), and utility companies may be looking at your credit report or credit score to determine what to charge you or whether to offer you a job.

When credit reports and scores were first developed, mostly lenders used them. However today, consumers' financial lives are impacted by poor or non-existent credit histories in many ways. For example, a young adult who hasn't yet built a credit history, may pay a higher deposit when they set-up electricity in their apartment than someone with a credit history.

Nearly one in five American consumers have no credit history, or so little data that a credit score cannot be calculated. People without credit history are "credit invisible," and it can make it difficult to build assets. The effect is not equally felt among U.S. consumers; Blacks and Hispanics are more likely than Whites or Asians to be credit invisible or to have unscored credit records.

The CFED's report, "The Importance of Credit Reports & Credit Scores for Building Financial Security," argues, "In many ways, a credit report is the gateway to financial opportunity, determining who has the chance to build wealth and security and who does not." If someone chooses to not borrow money (or have debt), should they be penalized?

Researchers and policy makers are looking at ways to change this financial barrier. An experimental pilot study of including rent payments in credit histories, found that 79% of participants who were credit invisible increased their credit scores after rent reporting. Others are exploring whether to include phone and utility payments in credit reporting. If you'd like to help this effort, the Consumer Financial Protection Bureau is requesting feedback from people who find it challenging to build a credit history.

I talk to people who are trying to build their credit history, but can't get a credit card or loan because they don't have a credit history. One possibility is to apply for a secured credit card. A secured credit card requires that you deposit money in an account as collateral. Often, but not always, this money will earn interest. Typically, the amount you put in as collateral will be your credit limit. For example, if you deposit $500, then your credit limit will be $500.

All secured credit cards are not the same. You need to ask questions and read the credit card agreement to understand fees and interest charges on revolving balances. Ask how the secured card may transition to a regular credit card. Make sure the credit card agreement does not require any other expenditure from you, such as set-up fees or the purchase of an insurance policy.

Double-check that the financial institution issuing the secured credit card will report your payment history to credit bureaus. You can begin to build your credit history by making payments on time. Check with local credit unions and banks to compare their secured credit card offers. In addition, websites like have lists of financial institutions offering secured credit cards.

Check your credit report at to see what your report looks like. You can check your report for free from each of the three credit bureaus once a year. To check your FICO credit score (the one most often used by lenders), you will need to pay a fee. Are you credit visible or invisible?