Establishing good credit in this day and age plays a significant role in becoming financially secure. However, there are still 26 million Americans that are still “credit invisible” under the traditional FICO scoring model.If you are one of the 26 million Americans that are “credit invisible” you may already know the challenges that this credit status may bring.
“Credit-Invisible and the “Catch-22.”
“Credit-invisible” can be looked at one of two ways, one you have the ability to start building your credit and establishing an excellent credit history. The “catch-22” finding lenders who will extend a credit card or loan to you may be difficult. Many lenders will consider you a risk because you don’t have a history to prove you are credit worthy. With the extraordinary amount of Americans in this current situation, there is a significant focus in this area and research being done to look into to alternative data, (rent, utilities, and cell phone bills) to prove a consumers credit worthiness.
In a recent study by the CFPB, states that consumers who transition out of being “credit Invisible” most consumers do it before the age of 25. However, statistics have shown individuals that achieve visibility after 25 reside in low to moderate income neighborhoods. Out of all the age groups and income levels, credit cards seem to be the fastest way to start creating a credit visibility.
It’s not a secret that the more money we make, the easier it is to pay our bills, but did you know that your salary could be making you “Credit Invisible?” Low-income consumers are 240 percent more likely to start your credit profile with a debt collection or a public record. In the CFPB’s most recent study they found that the consumers residing in lower-income areas are more prone to become credit visible due to negative items reporting on the consumer’s reports.“Today’s study shows that even at the beginning of their financial lives, they are faced with higher hurdles to gain access to credit, which hinders them from turning their version of the American dream into reality,” said CFPB Director Richard Cordray.
Ways to Become Visible
1. Obtain a secured credit card
2. Apply for a CD Credit building Loan.
3. Have someone add as an authorized user.
4. Make all your payments on time.
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