What is a thin credit file?

Did you know that some people don’t have credit scores? If you don’t have much information in your credit reports, or if you haven’t had a loan or credit card for a long time, you might not have a credit score. This is also known as having a thin credit file.

According to the Consumer Financial Protection Bureau (CFPB), 9.8% of adults have no credit scores because their credit files are too thin. If you’re in this group, you’ll find it difficult, or even impossible, to do things like borrow money or lease an apartment.

What can you do to fix thin credit? As a financial educator and former NFCC-certified credit counselor, I’ve helped tons of people solve credit problems like this one. Keep reading to find out how I recommend building a fuller credit file.

Having a thin credit file means there’s not enough information in your credit reports to calculate a credit score for you. This is also known as being “unscorable.” If you have a thin credit file, it’s for one of two reasons:

Insufficient credit: There’s not enough information in your credit reports to calculate a score. For example, the accounts that are reported don’t show enough payment information. This could happen if you only have collection accounts on your reports, or you’ve just recently opened your first credit card or loan. To have a FICO score, you need at least one account reported throughout the prior six months. For VantageScore, you only need one month.

Stale credit: The information in your credit reports is too old to be used in calculating your credit scores. If you haven’t had any payment activity reported on a credit card or loan within the past six months, you won’t have a FICO score.

Per the CFPB’s findings, 3.9% of all U.S. adults have thin files due to insufficient credit, while 5.9% have stale credit.

Note that having a thin credit file is not the same as being “credit invisible.” You’re considered credit invisible if you don’t have a credit report from any of the three credit bureaus (Experian, Equifax, or TransUnion), usually because there is no record of you having used consumer credit in the past.

Having a thin credit file can be just as frustrating as having bad credit. Your lack of credit scores will make it difficult, if not impossible, to qualify for affordable loans and credit cards.

In fact, when financial emergencies happen, people with thin credit files are more likely to take out high-cost loans, such as payday loans or cash advances. Unfortunately, these “solutions” can only worsen an emergency. While personal loans have an average APR of around 11%, payday loan rates are typically around 400% APR.

Other challenges you might face with thin credit include difficulty being approved for apartment leasing and trouble being hired for jobs that require credit checks.

According to the CFPB, there are several demographic groups with disproportionately high saturation of thin credit. They include:

Low earners: The lower your income, the more likely you are to have a thin credit file. Living in a low-income neighborhood can also be an influencing factor.

Minority groups: Black and Latino consumers, both of which have historically been denied access to financial systems, are more likely than white consumers to have thin credit files.

Residents of the South: People who live in the South are more likely to have thin files than other U.S. adults. The state with the largest percentage of unscorable residents is Mississippi.

Read more: This map highlights the average credit score in every state

The key to building up your credit file is to add new information to your credit reports. I recommend starting at the top of this list and working your way down until you find one or more options that can help you bulk up your file:

There’s a chance you could have a thin credit file due to an error. For example, if you have a family member with the same name as you, some of your credit accounts could have mistakenly ended up on their credit reports.

To find out if you have any credit report errors, you can pull your free credit reports from AnnualCreditReport.com. You have the right to dispute credit report errors and omissions for free and have them fixed.

If you open your own loan or credit card, it can take six months or more before you get your first credit score. Instead of waiting that long, get a jump-start from your spouse or another family member.

How can they help you? If they have good credit, ask them to add you to one or more of their credit cards as an authorized user. This only takes a few minutes to do, but once you’re added, their credit card account will show up on your credit reports. And you don’t have to actually use the card for this strategy to work.

Read more: How to build your kid’s credit before they turn 18

If you don’t have a family member who can add you as an authorized user, I recommend checking with your local credit unions to see if they offer a secured credit card.

These cards are designed for people with poor or no credit; you make a relatively small security deposit up front, which serves as your credit line. If you consistently pay your bill on time, you may be upgraded to a traditional card down the line.

Another financial product built to help people with credit issues is a credit-builder loan. Instead of receiving the money up front, the loan amount is held in a savings account while you make fixed monthly payments over a set term (typically six to 24 months). Each payment is reported to the credit bureaus, helping establish a positive payment history. Then, once the loan is paid off, the funds are released to you.

Store credit cards, or retail cards, are credit cards you can only use at one retail company. These products are easier to qualify for than regular credit cards, but they should be used with caution. Store cards are known to increase customer spending on non-necessities, and most of these cards have interest rates above 30%.