Invisible credit records: What happens when good credit exists but is not reported to the credit bureaus?
Credit reports and credit scores can work in mysterious ways. A move that you think will help increase your credit score can actually decrease it. A janitor may have a better credit score than a billionaire. A person who thinks that they have great credit may have no credit at all. Last week, we received an email from someone with a credit mystery:
I am having a problem getting a new credit card. They say that I don’t have enough credit. I own my home and I have had my vehicle for over a year. I also have one credit card issued by my personal bank but I can’t seem to get another line of credit. Why? What can I do about this?
To solve this mystery, we first need to look for some clues. Channel Inspector Clouseau! The author reports that she owns her own home and only has one credit card from a local bank. There is a good chance that she does not currently have any loans or credit card reporting to the three credit bureaus (Equifax, Experian and TransUnion). Small banks often do not report credit card accounts to the credit bureaus and it sounds like there may not be active loan records either.
With no credit information being reported, a borrower is viewed as a higher risk to potential lenders. Lenders and creditors use credit records to predict how potential borrowers will act. With no records, they assume that the applicant will be a risky borrower and will therefore charge a higher rate or turn them down for new accounts. The author should check her credit reports to see if she has a “thin file” (aka: no records). If this is the case, mystery solved!
Luckily, this is an easy problem to fix. Simply opening a new credit card and using it responsible every month can help boost the borrower’s credit scores significantly. A secured credit card or a card that accepts borrowers with no credit are good choices when trouble being accepted for other accounts.