So, you are ready for your first credit card. You confidently approach a lender and submit an application. But to your surprise, your application is returned with a note about “thin credit file”.
Thin credit file means that your credit report does not have enough, or perhaps any, information in it. Lenders are looking at your credit report to gain information about your past credit usage, and therefore your likelihood of using their credit wisely. When you have a thin credit file, it means that there is not enough there for them to make an informed decision about you.
There are several reasons why you might have a thin credit file. For example, you may be brand new to credit. Young people often face the problem of “thin credit”. If you have never had a credit card or are just starting to pay your own bills, there has not yet been enough information in your name to build up a credit report. Of course, this situation doesn’t just apply to young people. Anyone who has recently arrived in the country or has previously not been required to pay bills will not have sufficient credit to build a report.
Similarly, there may be a lack of information if you are just re-establishing credit after a long credit hiatus. While credit companies gain some information from routine things like paying bills on time, a lot of their information will come from how you use credit. If you have only recently started using a credit card or paying off your student loans, those lines of credit won’t show your credit habits immediately. It can take many months for your credit to be established, or re-established.
There are a couple of other possibilities to explain your “thin credit file” designation, but these are less likely. Occasionally, credit agencies might mistakenly think you are dead. As strange as that seems, it has been known to happen. In other rare cases, your credit file may have been split into two or more files. If you have moved often or gone through multiple name changes, this might cause your file to mistakenly split. In this case, there may not be enough information on one file.
In these last two cases, your solution will involve some added hoops and paperwork. But for the vast majority of you, a thin credit file is fairly easily resolved. Make sure to pay consistently on any credit you do already have. Paying your other bills, such as rent and utilities, on time will help as well. If you have no credit, there are some lenders who will authorize starter credit cards for those in your situation. Another great option is becoming an authorized user on the account of an established credit users card. It may take time to build your credit. However, keep working at it! With consistency and responsibility, your credit score will be where you want it.