Credit Profile Tools Could Fill Void for 28 Million

Number of the Day: The most relevant or interesting figure in personal finance

28 Million

That’s how many people are estimated to be “credit invisible,” a situation credit bureaus want to fix with new products empowering them to build or even create a profile.

To help consumers with little or no credit history build a record and create a credit score, for example, Experian—one of the three major credit bureaus—launched a new product this week. Called Experian Go, it’s a free mobile app that allows enrollees to plug in personal information, including their name and social security number, and start building a credit report and history.

The 28 million who are credit invisible are shut out from borrowing at reasonable interest rates and likely lack a credit file because they’ve never had a credit card, loan, or other type of credit account before, a study issued in October by Oliver Wyman and Experian said. Another 21 million U.S. adults have limited credit information on file but not enough to give them a credit score, making them “unscorable.”

Lenders rely on a person’s track record of paying other debts to decide whether to make a loan, as well as how much to lend and on what terms. That means there’s a built-in Catch-22: People who can’t get affordable credit can’t build a credit history. So both people who are credit invisible and credit unscorable often are unable to get loans at mainstream rates. 

Credit invisibility typically affects underserved communities and young people, the study found. Twenty-six percent of Hispanic consumers and 28% of Black consumers were unscorable or invisible, and 40% of credit invisible people were under 25. While many people become credit visible through student loans, student credit cards, and guaranteed credit (for example, by parents or other relatives), not everyone attends college and not everyone has a parent or relative with good credit who will act as a guarantor—especially those from low-income areas.

Recognizing these shortfalls in the existing system, the credit bureaus have been adding offerings that expand access to credit and help consumers start building and improving their credit histories. Besides the new Go product, Experian has a Boost product that lets users add on-time payments of non-debt accounts—like video streaming and utility bills—to their reports. And both Experian and Equifax have said they plan to start including buy now, pay later information in credit reports early this year.

Correction - Jan. 28, 2022 - This story was corrected after misstating that Equifax was already including buy now, pay later information in credit reports. Equifax has said it planned to start including buy now, pay later information early this year.

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