What Is a Thin Credit File?

Quick Answer

A thin credit file generally refers to a credit history with fewer than five credit accounts. Having a thin credit file can make it more difficult to access credit, but you can take steps to build and improve your credit history.

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Having a thin credit file can make it harder to qualify for credit and services when you need them. Even if you are approved, a thin file can keep you from getting the best rates and terms available. Here's what you need to know about thin credit files and how building a robust, positive credit history can help you.

What Is a Thin Credit File?

A thin credit file typically refers to a credit history with fewer than five credit accounts on a credit report maintained by one of the three national credit reporting companies: Experian, TransUnion and Equifax. Approximately 62 million Americans have a thin file, according to an Experian report.

Most credit scoring models need at least one or two active credit accounts on a credit report to generate a credit score. They also typically require payment activity for three to six consecutive months. If you have a thin file, a lender may not be able to obtain a credit score when considering your application. Lenders and service providers may request a larger down payment or offer credit at a higher interest rate as a result of not being able to assess risk using a score. In some cases, the lender may choose to decline the application altogether.

Who Is Most Likely to Have a Thin Credit File?

You may have a thin file if you:

  • Are young, since you may lack a credit history
  • Are new to the U.S., since credit scores and credit histories don't transfer from other countries
  • Haven't used credit in a long time, such as credit cards or loans
  • Have very few credit accounts or accounts that have not been active recently
  • Generally pay with cash and choose not to use credit often

How a Thin File Affects You

A thin credit file can make it more difficult to access new credit when you need it, including the ability to:

  • Get approved for a mortgage loan, car loan or personal loan with favorable rates and terms
  • Obtain a credit card account
  • Qualify for an apartment or rental home
  • Open a cellphone or other utility account
  • Be offered the best rates on auto insurance
  • Qualify for in-store financing of purchases

Most lenders in the U.S. rely on the information in your credit history to help them obtain or calculate a credit score and assist them in the decision-making process. If you have little to no recent history managing credit accounts, a lender may feel they are unable to accurately assess the risk of approving the credit you are requesting.

As a result, a consumer with a thin credit file could be denied credit altogether, or possibly only get access to a loan or credit card at very high interest rates, which can make borrowing money much more costly.

How to Improve a Thin Credit File

Consumers with thin credit files may feel like they're stuck in an impossible Catch-22 situation: To fatten up a thin credit file, you must have access to credit—but it's difficult to get access to credit when you have a thin file.

But all is not lost. It is possible to build and improve your credit file. Just like going from having no muscles to being a bodybuilder, or at least getting into better shape, it takes time to beef up a credit file. Here are a few ways you can begin building a robust credit history:

  • Use Experian Boost®ø. Experian Boost can help thicken your Experian credit file by giving you credit for phone, utility and streaming service bills you're already paying. The service is completely free and can boost your credit scores fast by using your own positive payment history.
  • Apply for a secured credit card. Secured cards require you to put down a deposit, which typically acts as your credit line. Because the credit line is "secured," credit card issuers are more willing to provide these credit cards to those with little or adverse credit history. The issuer will usually report your payments to one or more of the credit reporting companies, helping you build credit.
  • Get a credit-builder loan. These are usually small loans of $300 to $1,000. In some instances, you make payments that are put in a savings account and you do not have access to the money until you've completed the terms of the agreement. You make fixed payments toward the loan, and once you reach the end of the term, the lender will return the balance to you, possibly with interest. Check to make sure the lender reports your payments to the credit bureaus before agreeing to the loan.
  • Ask a close friend or family member to add you as an authorized user. As an authorized user on a credit card account, you can benefit from the primary cardholder's positive credit history. You can use the account to make purchases, but you are not responsible for making the payments. Not all lenders report their authorized-user accounts to the credit reporting companies, so check with the lender before requesting to be added to the account.

The Bottom Line

Fattening up a thin credit file may help you obtain financing and other services you need. But adding accounts to your credit report is only the first step—the most important factor in building a positive credit history and good credit scores is to manage your credit accounts responsibly. Do so by always paying your bills on time, keeping credit card balances low and applying for credit only when you need it.

Once lenders can see you know how to manage credit accounts, you could find yourself with options for low-interest loans, rewards credit cards and more.

If you don't yet have any credit accounts in your name, you can create your credit report with Experian and begin building your credit history right away using Experian Go™.

As you take on new accounts and build your credit profile, you can monitor your credit for free with Experian to watch your credit history grow.

How Good Is Your Credit Score?

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