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What Is a Thin Credit File and How Can You Improve It?

There’s a good credit score and a bad credit score, but what about the score that just isn’t there? According to Experian, one of the three major credit bureaus in the U.S., around 62 million Americans have little to no credit history, meaning their credit scores don’t even register. There is a name for this type of credit report. They’re known as thin credit files, and while it’s okay to have a thin credit file if you’re just starting out in the credit world, there are things that you can do to bulk up your portfolio so that you have access to more financial opportunities.

What Is a Thin Credit File?

If you have a thin credit file, that means that you have few — if any — credit accounts listed on your credit report. Credit accounts include anything related to a creditor loaning you money, such as a mortgage, credit card, auto loan, or student loan.

A thin credit file means there is little debt on which to base your credit history. And it often means that it is difficult or impossible for credit scoring agencies to generate your credit scores.

Scrabble tiles spell out the word debt on neon blue background

Who Has a Thin Credit File?

The most common groups of people who have thin credit files include:

  • Younger people
  • Immigrants who have not yet begun building a credit history
  • People who have very few credit accounts, or haven’t used credit in a considerable amount of time
  • People who have recently been widowed or divorced
  • People who use cash for everything


Economic background plays a significant role in a person’s credit visibility. People of low-income areas are disproportionately affected by thin credit files. According to the Consumer Financial Protection Bureau, the groups that have the most trouble accessing credit include people who are Hispanic, African American, immigrants, young, or recently widowed or divorced.

Close up of one hundred dollar bills

What Are the Consequences of a Thin Credit File?

A thin credit file can have a significant impact on your financial life. You often need credit to get credit. From a lender’s perspective, someone with a thin credit file is considered a bigger risk than someone with an established, good credit history.

When you apply for credit, a creditor runs a hard inquiry on your credit report to determine your creditworthiness. They are most interested in seeing how well you’ve managed your debts in the past and whether you’ve made payments on time.

The information in your credit report, as well as your credit scores, help them make lending decisions. If there is not enough information in your credit file, you could end up missing out on opportunities, such as getting approved for a mortgage, personal loan, or business loan.

Even if you are approved for a loan or credit card, you will likely have to pay a sky-high interest rate to prove you are a reliable borrower, which could turn out to be equally financially damaging.

Woman shows poor credit score on desk

The Difference Between Thin Credit and Bad Credit

A thin credit file is not the same as bad credit file. When you have thin credit, there are too few credit accounts in your portfolio to tell whether you are good or bad with credit.

When you have bad credit, there are plenty of credit accounts in your portfolio and you likely have a poor history of managing them. You might not have paid your bills on time, defaulted on debt obligations, or had accounts sent to collections.

In both situations, it can be tough to boost your score. With a thin credit file, you’re essentially starting from scratch and usually forced to find ways to improve your credit score through avenues that don’t require you to already have a good score.

With bad credit, on the other hand, you’ve established what kind of borrower you are. Unfortunately, some bad marks can stay on your credit report for as many as 7–10 years. If you’re working to improve your credit file and scores, you will have to work twice as hard to overshadow those negative marks and reestablish your credit image in the eyes of lenders.

Man holds paper displaying credit report and credit score over desk covered in supplies

How Does Your Credit Report Affect Your Credit Score?

When you have an open credit account — such as a credit card or loan — the balances and payment history on each of those accounts is reported to the three major credit bureaus each month. Those credit bureaus include: Equifax, Experian, and TransUnion.

Then, credit scoring agencies take the information in your credit reports, put them into their algorithms, and generate a three-digit number called a credit score, which illustrates your creditworthiness.

The top credit scoring agencies in the U.S. are FICO and VantageScore. FICO generates your FICO Score, which is used by 90% of lenders and credit card issuers to make lending decisions.

Any time that new information is added to your credit reports, your credit score can go up or down. That means that if you miss a payment or carry a large balance on one of your credit cards, you will likely see your score drop several points the next time that a new one is generated.

As you can imagine, if you have a thin credit file, you have too little information on your report to generate an accurate credit score. This makes it difficult for creditors to assess your creditworthiness when making a lending decision, which could lead to you missing out on the loan or having a very high interest rate to offset the risk involved.

How Do You Make Your Credit File Thicker?

Getting credit with little to no credit is no easy feat, but it’s not impossible. There are a few things that you can do to start building up your credit history. Once you do, it’ll only become easier to access other credit opportunities, as long as you continue to manage your credit responsibly.

Apply for a secured credit card

You’ve likely heard of the big credit card issuers, like Capital One, Discover, and Bank of America. You might’ve also thought that the credit cards that these financial institutions offer are inaccessible to you if you have a thin credit file.

The good news is that they each offer secured credit cards, one of the easiest ways for you to build credit from scratch. A secured credit card is a type of card that requires an upfront security deposit that is used as collateral in case you default on your payments.

The amount of the deposit varies, but it typically covers your spending limit. For instance, if you put down $200 on the card, you usually have a spending limit of $200. Like unsecured credit cards, you will receive a bill at the end of each statement period. And if you carry a balance from month to month, you can expect interest to accrue.

Also like regular, unsecured credit cards, it’s crucial that you make on-time payments and maintain a healthy credit utilization. Finance experts recommend that you don’t spend more than 30% of your credit limit at any given time. So if you have a credit limit of $200, you should only ever have a balance of $60 on the card.

If you don’t make on-time payments and keep your credit utilization in check, you could wind up building an unhealthy credit history from the start. Given that you have little information on your credit report, the majority of it will be negative, which will drag down your credit scores.

Take out a credit builder loan

Similar to secured credit cards, credit builder loans are a great way for people without a lot of credit to gain their footing and build credit. With a credit builder loan, you are approved for a certain loan amount, which is held in a bank account while you make payments. Those payments are then reported to the credit bureaus, which can boost your score if the payments are made on time.

Credit builder loans are typically offered by smaller financial institutions, such as credit unions and local banks.

Become an authorized user

Another easy way to start building your credit file is to become an authorized user on someone else’s credit card. This is a risk for both of you, so make sure you take your job as an authorized user seriously.

You’ll want to make sure that you choose your primary account holder responsibly. If you become an authorized user on an account with someone who manages their credit poorly, it could drag down your credit as well.

You should also not view this as a free ride. It’s important that you take full responsibility for your part as an authorized user. You should make payments when you need to and keep the balance on the credit card low.

From the primary account holder’s point of view, they should also be wary of bringing you on as an authorized user. The fact of the matter is that you might not have much experience with credit, so it’s up to them to take on some responsibility for how you handle the debt.

When you ask someone if you can become an authorized user on their account, make sure that you are ready to take on the responsibility and have a plan in place to make on-time payments so that you both can see positive results in your credit reports and scores.

Take advantage of your bills

If your regular service providers report bill payments to the credit bureaus, this can help your credit. Some billers — such as utility companies, cell phone providers, and rental agencies — report bill payments each month to the credit bureaus, which contribute to the payment history section of your file.

If your biller does do this, make sure that you are paying your bills on time and keeping documentation of when your bill was received. You should also check that your biller is reporting your payments accurately to the credit bureaus. Payment history accounts for 35% of your FICO Score, so if you’re making on-time payments, you should start to see this positively affect your scores.

You can check your credit reports with each of the three credit bureaus once per year for free. To request your free copy, visit AnnualCreditReport.com.

When checking your credit reports, look for errors that could be dragging your credit scores down. If you find that a bill payment has been reported incorrectly, you can dispute it with the credit bureau, which is why it’s important to keep documentation that your payment was received on time.

How Will a Thicker Credit File Help You?

Once you’ve bulked up your credit file, you’ll start to see that you’re eligible for a lot more financial products and services. As long as you’ve kept your credit file healthy as you’ve added more accounts, you will have:

Access to better credit cards with lower fees

Credit card issuers may pre-approve you for credit cards with competitive rates and terms. Be aware that this can be an easy way to rack up debt. However, having credit card offers at your fingertips can work in your favor if you’re looking to build your credit or spread your credit utilization across multiple cards.

Better yet, these cards often come fewer fees — or no fees at all. Credit card companies know that fees are an instant turn-off, so customers with good credit scores are offered lower balance transfer fees, no annual fees, and other perks.

Higher likelihood of loan approval

With a higher score, you can be pre-approved for a loan without having to go through the process of shopping around. With a low score, you could be disqualified as a loan candidate altogether.

Better interest rates and terms

With a positive credit history, you get access to top-tier interest rates, credit limits, and low-to-no fees on loans, credit cards, and lines of credit. Lenders will compete hard for your business, which you can use to your advantage when negotiating better terms.

If your credit score improves after your initial policy agreement, you can even ask your creditor to re-run your credit check to get lower rates.

Lower insurance premiums

Creditors aren’t the only ones paying attention to your credit score — insurers also have a vested interest. When signing up for insurance, an insurer will look at your credit file to determine how reliable you are with debt management. With higher scores and better marks, you’re rewarded with lower monthly insurance payments.

More options for rentals, jobs, and financial services

Future employers, leasing agents, utility companies, and phone providers — they want to know that you have a positive credit history before bringing you on as an employee or customer. Not only will you have more options for where you can rent, work, and become a customer, different companies can reward you with lower or waived security deposits, better monthly payments, and new products or services at no additional cost.

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $11 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.

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