What Does “Invisible Credit” Mean?
The term “credit invisible” refers to the lack of a credit history with one of the three major credit agencies. TransUnion, Equifax, and Experian are the three bureaus in question.
You probably don’t have a credit report if you don’t have a credit history with one of those firms. That means lenders can’t see anything about you when they check your credit to see if you qualify for a loan. In terms of credit, you’re invisible to them.
The Drawbacks of Credit Invisibility
Being credit invisible may sound appealing, but it may be a significant pain. Credit histories and ratings are used by businesses of all kinds to evaluate you as a borrower, consumer, or employee, and if you don’t have any, you’re a complete mystery to them.
Businesses dislike surprises. They won’t be able to make an acceptable risk assessment of doing business with you if they can’t discover anything about you, which means they won’t want to lend you money or provide you with services. Here are a few examples of how credit invisibility can make life difficult:
- You may be unable to obtain loans or credit. You may be unable to obtain a credit card, vehicle loan, personal loan, or mortgage as a result of this. You may end up paying a lot more in interest if you are able to obtain financing.
- You might have trouble finding a rental. Credit reports and ratings are frequently used by landlords to determine whether you would be a reliable tenant who pays the rent on time. It’s possible that being credit invisible will limit your renting selections.
- Services such as car insurance may be more expensive. Credit scores are one method that auto insurance companies assess a driver’s risk. You may be charged by other service providers, such as cell phone and utilities companies. a larger deposit to compensate for the possibility that you will not be able to pay your bills.
- Certain employment may be unavailable to you. Before hiring, certain businesses, particularly those in the financial sector, run a credit check. Although having no credit history may not prevent you from getting the job, it may be a red flag on your application.
Invisible Credit vs. Unscorable Credit
Credit invisibility is not the same as credit inaccessibility. A credit history exists for someone who is credit unworthy. It simply does not provide enough data for credit scoring models to produce a score.
How Do You Begin to Establish Credit?
No concerns if you’re unsure whether you’re a credit invisible or merely have an unscoreable credit file. The steps you must take to establish credit and obtain a credit score—hopefully a good one—are the same.
Here are some steps you may take to begin establishing credit and making your credit visible.
Create an ExtraCredit account and use the Build It function. Reporting the payments you’re already paying on time is a wonderful approach to improve credit history. Normally, rent and utility payments are not recorded to credit bureaus. However, you can join up for a service like ExtraCredit, which will add those as new tradelines to your credit report.
Make an application for a credit-building loan. You don’t need a credit score to get approved for a credit-builder loan because they’re meant for folks with bad or no credit. Look for lenders who report to all three credit agencies so that you can use the credit-building loan to establish credit with all three at the same time.
Make an application for a secured credit card. Secured credit cards require a deposit to secure your line of credit, which is often between $250 and $300, and they do not require good credit. Again, you’ll want to find a credit card provider that reports to all three credit bureaus so you can consolidate your credit files.
Obtain authorization to use someone else’s credit card. To build credit, you don’t need your own credit card. You can build a credit history if you’re an authorised user on someone else’s account and the company reports activity on authorised users’ credit reports as well.
Obtain a loan cosigner. You may require a loan to assist pay for schooling or to purchase a vehicle so that you can get to work. You have a better chance of securing the loan if someone with a strong credit history agrees to cosign. This loan can then be used to help you establish good credit in the future.
Keep your good credit once you’ve established it
It takes time and effort to establish good credit, so be sure you maintain it. That means being responsible with your money and paying all of your bills on time. A service like ExtraCredit can help you maintain track of your credit report and score. That way, if you see a mistake that could jeopardise the good credit you’ve worked so hard to earn, you’ll be able to correct it fast.