How to Strengthen a Thin Credit File

Quick Answer

To make your thin credit file more robust, you can open a credit card or credit-builder loan, get added to a loved one's credit card account as an authorized user, get credit for more payments and continue to practice good credit habits.

Stressed couple, They are trying to strengthen their credit files.

If you're relatively new to credit or you've taken a break from debt in the recent past, your thin credit file could make it difficult to get approved for credit with favorable terms when you need it.

The best way to build out your thin credit file is to add new accounts and alternative payments to your credit reports and to practice good credit habits. Here's how to do it.

What Is a Thin Credit File?

A credit file or credit history contains details about how you manage credit, such as loans and credit cards. You're considered to have a thin credit file if one or more of your credit reports has fewer than five active credit accounts or tradelines.

Those who have thin credit files include younger people who are new to credit, recent immigrants and people who generally don't use credit.

6 Ways to Strengthen a Thin Credit File

If you're thinking about applying for a loan or credit card, having a thin credit file will not only limit your options but also likely cost you more in the form of higher interest rates and fees.

Thickening your credit file can take some time and patience, but it can ultimately save you money in the long run. Here are some steps you can take to do it.

1. Open a Credit Card

With a limited credit history, you likely won't qualify for most credit cards. But some card issuers specialize in working with people without a long track record.

The primary option to consider is a secured credit card, which requires you to put up a security deposit—often equal to your desired credit limit—to act as collateral. If you fail to make payments, the card issuer can use the funds to satisfy the debt.

However, some card issuers also offer unsecured credit cards that you may be able to get with limited or even no credit history. Examples include retail cards and nontraditional cards. That said, some of these cards charge high interest rates and fees, so it's important to shop around and compare several options to find the right fit.

2. Become an Authorized User

If you're not sure about getting your own credit card, you can ask a loved one with good credit to add you as an authorized user on one of their credit card accounts. Once they add you, the card's full history will show up on your credit reports.

As the primary cardholder continues to use the card, their payment history and credit utilization can continue to help improve your credit history. Just keep in mind that if they rack up a large balance, it could also have a negative impact on your credit score.

3. Get a Credit-Builder Loan

A credit-builder loan is a type of installment loan where you make a monthly payment, and the lender holds on to the loan proceeds until you've completed your repayment term. At the end of the repayment term, you will gain access to the funds.

Credit-builder loans typically range from $300 to $1,000, and you'll usually make payments over a period of six to 24 months, which the lender will report to the credit bureaus. While the tradeline is closed at the end of the repayment term, it can still add some depth to your credit profile. Just keep in mind that not all lenders report credit-builder loans to the credit bureaus; make sure yours does if you go this route.

4. Sign Up for Experian Boost®ø

In addition to applying for new credit accounts, you can also add payment history from accounts that aren't typically reported to the credit bureaus. With Experian Boost, you can get credit for alternative bills, such as eligible rent, cellphone, utilities, insurance and even select streaming service subscriptions.

The free feature links to your bank account and identifies eligible payments, and you can select the bills you want to include. Once you add them to your Experian credit file, you could see an increase to your FICO® Score instantly.

5. Get a Cosigner

If you need to take out a loan to buy a car or cover some emergency expenses, a credit card or credit-builder loan may not be adequate.

While there are auto loans, personal loans and other types of credit you can get even with a limited credit history, you may have a better chance of getting a low interest rate by getting a creditworthy cosigner to apply with you. Because the cosigner is agreeing to make payments if you can't, the lender will consider both credit histories when determining your eligibility and loan terms.

Before going this route, however, it's important to make sure your cosigner understands their responsibility and how the move may impact their credit. Even if you always pay on time, the loan will show up on their credit reports and may potentially affect their ability to get credit for themselves.

6. Pay Your Bills on Time

Ultimately, the best way to strengthen your credit file is to add more positive payment history. Paying your loan and credit card bills on time is crucial, but it's also important to pay other bills promptly. Even if a provider, such as an insurance carrier or utility company, doesn't report your on-time payments to the three national consumer credit bureaus (Experian, TransUnion and Equifax), they may report a delinquency. Or, if your unpaid bill gets sent to collections, that can also show up on your credit reports and impact your credit score.

To ensure on-time payments, consider setting up autopay on your accounts or creating alerts and reminders to pay manually. Also, make sure you have a buffer in your checking account to avoid having a payment returned due to insufficient funds.

Track Your Progress With Free Credit Monitoring

As you work to build out a thin credit file, Experian's free credit monitoring service can make it easy to track your progress. You'll get access to your FICO® Score and Experian credit report, along with real-time alerts when changes are made to your report.

Monitoring your credit regularly can help you understand more about how your actions impact your credit score and also give you the information you need to address potential problems before they damage your credit and thwart your efforts.