In 2016, the Consumer Financial Protection Bureau (CFPB) published a report showing that at least 26 million people were “credit invisible,” meaning that none had credit history records. In addition to this, they also discovered that 19 million more have “unscorable” credit files.
As you may guess, this new category is widely extent among consumers living in low-income neighborhoods, with a global 30% of its inhabitants fitting into it. Of these 45 million people back then, 60% belongs to Hispanic and Black consumers.
The report contains detailed data about states and cities. Going local, we found that almost 825,000 credit invisible and unscorable consumers live in the Miami, Fort Lauderdale, and West Palm Beach areas. An 18% of the population back then.
We are still waiting for recent data about this phenomenon. Still, the CFPB considers that tendency remains, meaning that at least 20% of the U.S. adult consumer population are credit invisible and unscorable consumers today.
What does that mean?
When someone is credit invisible because of not having a credit record history or having a thin and insufficient file to be classified, he is out of the financial system. It is like it does not exist. Lack of economic opportunities like getting a fair rent, a personal loan, or even a car deal, constitutes a daily burden challenging to overcome.
There are different reasons for someone to be or decide to be credit invisible. The good news is that there are simple ways to leave this group by taking simple actions. The benefits of applying these measures could reach the “invisible” person and his closest family by open windows of opportunities to, believe it or not, saving money.
If you are in this situation or know about someone who could be among it, we have tips for you:
- Get a retail store credit card: These financial instruments usually have lower credit limits, but they also have very few requirements. Once you got one of these, you could start building your credit score from scratch.
- Find a credit union: These institutions offer locked saving account where they deposit a loan not bigger than $1,000 in your name. Then through small payments made between 6 to 24 months, you repay the total amount. In the end, you will have to save and contribute to your credit score at the same time with little effort.
- Use secure credit cards: Similars to traditional credit cards also allow you to make purchases and start building your record. Applications are accessible, and once you get approved, you must deposit an amount of money to use the card. The good thing is that the bank that had issued this financial instrument will report to credit bureaus about your activity.
There are other alternatives related to bill payments. There are companies and associations offering credit for paying monthly utilities and cell phone bills. Asking your landlord or your mobile company about this option is good advice to consider.
Remember, a credit and a good credit score are not goals themselves. They are just a way to become more affordable and realistic those dreams and plans you are pursuing daily.