What does it mean if I have a ‘thin credit file’?

Young man standing in front of a brick wall and wondering, "What does it mean if I have a thin file?"Image: Young man standing in front of a brick wall and wondering, "What does it mean if I have a thin file?"

In a Nutshell

A thin credit file means you don’t have enough information — or enough recent information — in your credit history for a credit bureau to determine your credit score. A thin file can make it difficult to get approved for a loan or credit. The good news is you can build up a thin credit file over time. Secured credit cards and credit-builder loans could be a starting point. And if an error on your credit report is the reason for your thin file, you can dispute it.
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Have you discovered that you don’t have credit scores? You may have a thin credit file, meaning you don’t have enough credit history for the three major credit bureaus — Equifax, Experian and TransUnion — to get a clear picture of your credit and generate scores.

A thin credit file can make it difficult to get approved for a mortgage, auto loan or credit products — and if you are approved, you could pay a higher interest rate.

Read on to learn more about how a thin credit file can negatively affect you and what you can do to begin building a credit history.

What does it mean to have a thin credit file?

A thin credit file means you don’t have enough credit history for a credit bureau to calculate a credit score. Experian describes a thin credit file as a credit history with fewer than five accounts or accounts that have only been open for a short period of time.

You may also have a thin file if you don’t have enough recent credit history. TransUnion notes on its website that a credit score won’t be calculated for you if your credit history has no updates or credit inquiries within the past two years.

Without proof that you have a history of making the monthly minimum payment on time and keeping your credit utilization low, lenders could view you as risky and may not approve you for a loan or credit card. And if they are willing to take on the risk, they’ll likely charge you a higher interest rate in exchange, which could add thousands of dollars to the cost of your loan, depending on the size of your loan. If you have a thin file, you may also struggle to get approved to rent an apartment if the landlord requests a credit check.

Why do I have a thin credit file?

Here are some reasons why you may have a thin credit file.

You’ve never had credit

If you don’t have any lines of credit listed on your credit reports, like a credit card, mortgage, auto loan, student loan or any other kind of loan, a credit bureau may not be able to generate a credit score for you. This may be the case if you’re recently divorced or widowed and your spouse put all loans and credit cards in their name. You may also have a thin credit file — or no credit file at all — if you recently moved to the United States from another country and have little or no credit history established in your home country.

3 ways to get a credit score as an immigrant

You’re new to credit or reestablishing credit

If you’ve recently opened your first credit card or loan, don’t expect to have credit scores right away. It takes time to build your credit history and develop scores. In the meantime, there may be very little information in your credit file. The same applies if you’ve recently started reestablishing credit after closing your credit accounts or after a period in which you used only cash or debit cards.

The credit bureaus think you’re deceased

It seems weird, but it happens: Credit bureaus can mistakenly believe you’ve passed away. Deceased people don’t have credit scores, so you might be told you have a thin file if that’s what the bureaus think. Unfortunately, correcting this can be a lengthy, time-consuming process.

Your credit file is split

Like a credit bureau mistakenly thinking you’re dead, a split file is an outlier. Split files rarely occur, but when they do it’s often because there’s a lot of information on your report or your personal information, like your name and address, have changed frequently. Both causes can lead to a single credit bureau having multiple credit reports and credit scores on file for you, each with different information about the financial institutions you bank with and the financial products you use. If your information is being split, it could potentially lead to a credit bureau trying to generate a score for you based on very limited information.

How can I fix a thin credit file?

Here are some ways you can begin to build credit and fix any errors on your credit reports.  

Secured credit card

Secured credit cards are designed for people who want to build or rebuild credit, so your lack of credit history may not be an obstacle to approval. In fact, some secured card issuers don’t even check your credit. These cards are backed by a security deposit that you provide, which usually becomes your credit limit. When applying for a secured card, be sure to ask whether the card issuer reports your monthly payments to the credit bureaus. Making consistent, on-time payments and keeping your credit utilization rate below 30% can help you build your credit. Also, consider annual fees and other card terms to help make sure you can afford the card.

Credit-builder loan

Another option is a credit-builder loan, a type of loan where the lender offers you funds that are deposited into an account held by the lender. You’ll then make monthly payments to pay off the loan. You’ll be able to use the funds — minus any fees and interest — after you pay the loan back. Before you take out a credit-builder loan, shop around and compare loan terms and rates from a few banks, credit unions or online lenders. This can help you identify the loan that best fits your needs.

Report and dispute credit report errors

If you think you’ve been marked as deceased, have a split file or find other errors on your credit reports, contact the credit bureaus and notify them of the mistake. You can also file a dispute. To dispute, you typically need to provide information such as your full name, current mailing address, Social Security number, birthday, a written statement explaining the error and any supporting documents.

In the case of a split file, first check that your information is actually being misreported by obtaining your credit reports from the three major credit bureaus and comparing from bureau to bureau. If it’s clear from this comparison that one of the bureaus has accidentally split your file, you can then contact that credit bureau directly to have your reports merged.

What’s next?

A thin file may make you feel discouraged, but taking the steps to dispute any credit report errors and to build your credit could pay off. Improved credit scores may help increase the likelihood of being approved for a loan and could result in better rates and terms, potentially saving you thousands of dollars, depending on the size of your loan.

For more ways to establish and improve your credit history, check out our Guide to Building Credit.