What Is a Thin File?

A “thin file” refers to the credit report of someone with little or no credit history. Consumers who are just starting out and may never ha✅ve taken out a loan or had🔯 a credit card are said to have thin files.

Understanding a Thin File

Credit bureaus compile data on how you use and manage your credit and debts to generate a 澳洲幸运5开奖号码历史查询:credit report. Your credit report includes information on how much you have in outstanding debts and whether you have paid your bills on time. All of this information is used to calculate your 澳洲幸运5开奖号码历史查询:credit score, whi💝ch is a three-digit number that reflects your creditworthiness.

Your cr🦂edit report includes the following inform🐻ation:

• Bill payment history, such as the number of on-time and late payments and how many days late
• Credit accounts, including loans, credit cards, store charges cards, and student loans
• Outstanding loan and credit card balances
• Discharges that have occurred if you defaulted on a debt
• Bankruptcies

The following parties use information from your credit report to determine their creditworthiness:

• Prospective lenders for loans
• Credit card companies
• Insurance companies
• Employers
• Landlords
  

A thin file can make getting approved for credit or a loan challenging because it gives lenders very little information with which to judge a person’s creditworthin✤ess.

How to Build Credit with a Thin File

If you have a thin file and want to borrow money, you have 澳洲幸运5开奖号码历史查询:several options.

Use Financial History Not Re🦩ported ♑on Credit Report

When building your credit, asking a lender to consider payments that usually aren’t reported to the credit bureaus can be helpful. Some lenders will consider other information when making their decisions to get around a potential borrower's thin credit file.

For example, your payment history with utility bills or rent can be used to 🦩reflect an on-time, responsible payment histo🌸ry.

When applying for a home mortgage loan, 澳洲幸运5开奖号码历史查询:Fannie Mae says lenders can construct a nontraditional 澳洲幸运5开奖号码历史查询:credit history for you using a combination of your 澳洲幸运5开奖号码历史查询:bank statements, 澳洲幸运5开奖号码历史查询:canceled checks, bills marked as paid, and reference letters from 澳洲幸运5开奖号码历史查询:creditors and landlords.

Secured Credit Card

If you have little or no credit history, getting an unsecured credit card can be challenging. However, a 澳洲幸运5开奖号码历史查询:secured credit card can help you build a history of on-time payments. A secured credit card requires you꧟ to deposit a sum of money with the lender, who will issue the card with a maximum credit limit that matches the total amount held on deposit.

As a result, you can use the ෴secured card similar to an unsecured one. For example, renting a car or getting a hotel room when trav📖eling usually requires a credit card hold.

Building your credit history with a secured credit card requires more time and effort. Be sure to get a secured credit card that will report your payments to all three major credit bureaus: Equifax, Experian, and TransUnion. Also, remember to pay your bills on time. Otherwise, you’ll build a poor credit history. Also, look for a 澳洲幸运5开奖号码历史查询:secured card with a low or no annual fee.

After you’ve used a secured card for a while and your credit history is no longer as thin🐻, you may be eligible to apply for a convent꧒ional unsecured credit card.

By that time, you will likely have established a credit score as well. According to Experian, “Accounts usually need to have a minimum of three months and perhaps as much as six months of activity before they can be used to calculate a credit score.”

Credit Builder Loan

Similar to a secured credit card, some banks and credit unions offer secured 澳洲幸运5开奖号码历史查询:installment loans. Instead of getting the loan proceeds upfront like a traditional loan, with a 澳洲幸运5开奖号码历史查询:credit builder loan, the bank holds the money on deposit. You make monthly payments similar to other loans, and w🌼h♒en you have paid off the loan, the funds are returned to you. Credit builder loans can help a borrower build credit since the loan payment history gets reported to credit bureaus.

Improve Your Credit

As you build your thin file, it's important to manage your credit. Below are some key characteristics of your credit history that can impact your credit score.

On Time Payments

Pay your bills on time, and be s𝓡ure to 🍌pay at least the minimum amount due each month.

Credit Utilization

Be sure you do not max out your credit cards since it hurts your credit utilization, which represents the percentage of your available credit that has been used up. Typically, a credit utilization below 30% can help your credit score.

Don't Close Your Credit Accounts

How long your accounts have been opened impacts your chances of obtaining credit. Creditors tend to favor borrowers with long credit histories. Also, your credit utilization will suffer since closing a credit account reduces your available credit.

The Bottom Line

A thin file refers to someone with little to no credit history within their credit report. A thin credit history can make it challenging൲ to get approved for a loan, mortgage, or credit card. Some creditors will consider other information when making a credit decision, such as your payment history for utility billཧs and rent.