Battling a Thin Credit File

A thin credit file can be a challenge for young adults new to the world of credit. Your credit file represents the number and type of accounts you have opened, as well as any recent activity.

What is a Thin Credit File?

When you have a thin credit file, a bank or lender can find it challenging (or even impossible) to assess your creditworthiness. As a result, you might not qualify for the types of credit you need to purchase cars and homes, apply for credit cards, open a future business, or generally receive favorable loan terms.

How to Build a Credit History

In exchange for the risk of extending you a credit limit on a thin credit file, some of these actions let you make a security deposit or borrow from yourself to demonstrate exemplary personal finance habits and demonstrate you’re fairly responsible with credit.

What Credit Accounts Should I Consider First to Build My Credit Score?

Consider a secured credit card as a cousin of an unsecured credit card and an excellent way to learn how to build credit and ending your days of carrying a thin credit file.

1. Secured Credit Card

2. Credit Builder Loan

These loans do not require you to have stellar credit to receive approval, just the income to make payments. They work by depositing money into a bank account and borrowing money from it while making repayments.

3. Authorized User Status

If you don’t meet the requirements for having credit cards on your own, having an authorized user status on a cardholder’s account might be beneficial to building positive “payment history,” a credit scoring component.

4. Alternate Payment History Appearing in Your Credit Report

By paying rent, utility bills, and rent, you also demonstrate your ability to manage other liabilities. Taken together, these added items can create a good credit score worth using when applying for a loan or credit card from a bank or credit union.

Swipe up TO KNOW MORE ABOUT Battling a Thin Credit File