Many consumers worry that their credit rating isn't high enough, but a new report finds that 26 million Americans have no credit rating at all, making them "credit invisible."
The Consumer Financial Protection Bureau (CFPB) published the report, which finds that one in 10 adults have no credit history, many of them black, Hispanic or living in low-income neighborhoods.
“Today’s report sheds light on the millions of Americans who are credit invisible,” said CFPB Director Richard Cordray. “A limited credit history can create real barriers for consumers looking to access the credit that is often so essential to meaningful opportunity — to get an education, start a business, or buy a house. Further, some of the most economically vulnerable consumers are more likely to be credit invisible.”
The three nationwide consumer reporting agencies, also called credit bureaus, generate credit reports that track a consumer’s credit history. Credit reports and the three-digit credit scores that are based on those reports play an increasingly important role in the lives of American consumers -- and those with a low, or non-existent, credit score face hurdles in getting credit.
In broad terms, consumers with limited credit histories can be placed into two groups, the CFPB said.
The first group is consumers without a credit report, or the “credit invisibles.” The second group, the “unscored,” includes consumers who do not have enough credit history to generate a credit score or who have credit reports that contain “stale” or not recently reported information.
Today’s report found that:
26 million consumers are credit invisible: About one in 10 Americans can be considered credit invisible because they do not have any credit record. About 189 million Americans have credit records that can be scored.
19 million consumers have unscored credit records: About 8 percent of the adult population has credit records that are considered unscorable based on a widely-used credit scoring model. Those records are almost evenly split between the 9.9 million that have an insufficient credit history and the 9.6 million that lack a recent credit history.
Consumers in low-income neighborhoods are more likely to be credit invisible or to have an unscored record: Of the consumers who live in low-income neighborhoods, almost 30 percent are credit invisible and an additional 15 percent have records that are unscored.
Black and Hispanic consumers are more likely to have limited credit records: Black and Hispanic consumers are considerably more likely to be credit invisible or have unscored credit records than White or Asian consumers. About 15 percent of Black and Hispanic consumers are credit invisibles compared to 9 percent of White consumers.
This analysis was conducted using information from the CFPB’s Consumer Credit Panel, which is a random sample of de-identified credit records purchased from one of the nationwide credit reporting agencies and is representative of the population with credit records. By comparing information in the credit panel from December 2010 with 2010 Census data, the Bureau was able to estimate the number of consumers who were credit invisible or had unscored credit records.
The full report is available online.