You’re living a comfortable life, and your paycheck more or less covers day-to-day activities, so there’s no reason you should ever borrow money, right? I mean, now and then you’ll borrow $5 from your friends for lunch, but overall there’s no good reason to go into debt.
This sort of mentality is the driving factor for what is known as “credit invisibility” — a portion of the consumer population who lack any kind of credit history, and inadvertently preclude themselves from significant financial mobility.
A study from the Consumer Financial Protection Bureau found that over 26 million American adults are credit invisible. This means that one in ten Americans eligible for credit have zero history of borrowing and therefore a non-existent FICO score. This already high percentage further increases as a portion of low-income households.
Whether due to lack of education, waning trust in the economy, or increasing wealth disparity, millions of Americans are choosing to avoid credit altogether, and while this might seem harmless at first blush, there are actually long lasting consequences to credit invisibility.
A common misunderstanding is that no credit is synonymous with good credit. People wrongfully believe that never borrowing money is a means of maintaining a pristine credit report, but in fact, the opposite is true. While there may not be any immediate consequences to credit invisibility, there are long term effects you should be aware of.
No credit is a quick indication to lenders of your inexperience with borrowing money. In the event you need a loan or credit card, but lack credit history, you have zero proof of your borrowing capability and have a low chance of being approved. Credit invisibility inhibits many life milestones such as buying a car or getting a house.
It’s easy to become apathetic when faced with what feels like the insurmountable task of building credit from nothing. But, don’t give up hope — there’s no better time than now. Here are several ways credit invisible individuals can start on the journey toward a better FICO score:
Want to start building or improving your own credit report? CreditRepair.com offers a free personalized credit consultation and audit of all of your credit accounts. With access to industry-leading repair services, CreditRepair.com members typically see a 40-point score improvement in the first four months of their subscription.
Carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us tweet on Twitter.
Should you hire a financial advisor? Here you can get all of your questions about…
While paying off collections generally won’t improve your credit score, newer scoring models like FICO…
If you’re wondering “how much will a secured credit card raise my score,” it won’t…
Learn what credit mix is and how it affects your credit score, as well as…
Discover the best finance podcasts to learn everything from how to create a budget to…
Do utility bills affect your credit score? Get the facts about how accounts like gas…