What does it mean to be credit invisible & how do you fix it?

Building credit can feel like trying to open a locked door without the right key — especially if you don’t have any credit history to begin with. 

Some people and small business owners find themselves “credit invisible,” which means lenders can’t find enough information to assess their creditworthiness. Understanding what it means to be credit invisible is the first step toward unlocking access to better financial opportunities.

What does credit invisible mean?

Being credit invisible means the major credit bureaus have no credit file associated with your name, making it impossible to generate a credit score. About 7 million consumers (just under 3% of adults) were credit invisible in 2020, according to research by the CFPB. 

The Consumer Financial Protection Bureau studied credit invisibles and divided these individuals into two groups:

1. Consumers without credit records at the major credit reporting agencies. They refer to this group as "credit invisibles."
2. Consumers who have credit reports, but their reports are "unscored" or “unscorable” because they don't have enough credit history to generate a credit score, or credit activity is not recent enough to help calculate a score.

Here, we'll include people who fall under both definitions as we discuss credit invisibles. You may relate to this problem because you lack a credit history at all, or your credit history is so thin that credit bureaus can't create a credit score.

For reference, in the case of consumer credit, we're referring to credit reports with the three major credit bureaus: Experian, TransUnion, and Equifax. 

In the case of business credit, we're talking about businesses that lack a credit history with business credit bureaus, including Dun and Bradstreet (D&B), Equifax, and Experian.

There are times when you may very well want to be invisible: you’re a student and a teacher is calling on you to explain something you haven’t studied, for example, or you’re in the audience of a comedy show and the comedian is looking for someone to single out. 

But when it comes to credit, being invisible can be a liability that can hold you or your business back from getting the loans, capital or partnerships you need. When lenders can’t find a credit report about your business (or you personally), they may be hesitant to lend you money. 

Why am I credit invisible?

There are many reasons why you could credit invisible, including these common situations where you are:

• Young and new to credit
• An immigrant new to the US credit system and haven't built a credit history in the US yet 
• Primarily use cash or debit cards, and avoid credit
• Older and don’t use credit anymore so accounts have either aged off your credit, or show no recent activity 
• Avoiding credit because you're afraid it will lead to debt problems 
• Following financial advice that recommends avoiding credit entirely 
• Trying to recover from past credit problems, and avoid credit as a result
• Having trouble qualifying for credit

CFPB research has also identified socio economic factors that are closely tied to credit invisibility, specifically:

“There is a strong relationship between income and having a scored credit record. Almost 30 percent of consumers in low-income neighborhoods are credit invisible and an additional 15 percent have unscored records. These percentages are notably lower in higher-income neighborhoods.

“Blacks and Hispanics are more likely than Whites or Asians to be credit invisible or to

have unscored credit records. About 15 percent of Blacks and Hispanics are credit

invisible (compared to 9 percent of Whites and Asians) and an additional 13 percent of

Blacks and 12 percent of Hispanics have unscored records (compared to 7 percent of

Whites).”

For small business owners, it's common to be credit invisible (sometimes with a single commercial credit bureau) simply because many vendors and lenders that extend credit don't report payment history to all the major business credit bureaus.

How can credit invisible hurt your business?

There are often consequences to being credit invisible, either with your personal credit or business credit.

Without strong personal and/or business credit, it can be more difficult to secure small business loans with traditional lenders like banks, lease commercial space, or obtain favorable terms from suppliers. Your business may pay higher interest rates or get lower credit limits.

Most small business credit cards require good to excellent personal credit scores. 

When you do need financing, you may be forced to turn to higher cost financing that doesn't check credit, such as merchant cash advances. You may be required to sign a personal guarantee. 

A lack of a credit history can also make it harder to land contracts with larger companies who may not want to take a chance on a business with a limited track record.

Some insurers check credit when underwriting business insurance policies, and the lack of a credit history could lead to a denial or higher premiums.

What is a thin credit file?

A thin file is closely related to being credit invisible. There's no single or legal definition, but generally it refers to a credit report that exists, but that contains little information. 

Some thin credit files are not scorable, or credit scores may be low due to a lack of recent activity on accounts. 

Either way, there is not enough information for the scoring model or lender to accurately assess creditworthiness.

With business credit, this is a common problem. Most people think low credit scores are due to negative information like late payments or collection accounts. But if your business credit reports don't contain much information about your payment history, your business may have a low credit score.

For example, D&B’s PAYDEX^® score is based on payment history, and limited tradelines may result in a lower score.

How to go from credit invisible to establishing credit

Whether it's business or personal credit, the basic steps for establishing credit involve getting accounts that report to credit bureaus, paying them on time, and keeping balances on revolving accounts like credit cards credit low.

Building credit from scratch requires strategic action, but the process is straightforward once you know your options.

1. Get a secured credit card

A secured credit card is one of the most accessible starting points for building credit from scratch. Unlike traditional credit cards, secured cards require a cash deposit as collateral – typically $200 to $500 – which becomes your credit limit.

This deposit reduces the risk for credit card companies, making them willing to approve people with no credit history. If your payment history gets reported to all three major credit bureaus, this account can help you establish a positive credit record when you pay on time. 

Because credit limits on these cards are often low, it’s a good idea to keep a careful eye on your credit utilization, which evaluates how much of your available credit you’re using. High utilization (high balances compared to credit limits) can hurt your credit scores even if you pay on time. 

2. Use a credit builder loan

Credit builder loans work differently than traditional loans. Instead of receiving money upfront, you make payments toward a savings account and the lender holds that money. When you’ve paid off the loan (or close the account), you receive the money, minus fees. 

Some credit builder loans are specifically designed for people and businesses building credit from scratch. If the lender reports your payment history to credit bureaus, you can create a positive payment record that helps you build a credit score.

3. Become an authorized user

Being added as an authorized user to a friend or family member's credit card may allow you to benefit from their positive payment history. When someone adds you to their account, that card's history may appear on your credit report.

This strategy, which is used primarily with personal credit, is sometimes called "piggybacking." It works best when the primary cardholder always pays the account on time and keeps balances low. Make sure the card issuer reports authorized user activity to all three credit bureaus. 

4. Get credit for bills you already pay

Traditionally, rent or utility bills don’t get reported to business credit. Services like Experian Boost, can add these types of payments to your Experian credit file. While not all scoring models include this type of data, it may help establish a credit history with Experian. 

Some services also report cell phone and streaming service payments to credit bureaus, giving you credit for bills you're already paying responsibly.

How Nav can help with credit invisible files

Nav can help your business on its credit journey with tools to build, manage and monitor your business credit.

A free Nav account allows you to monitor overall business credit and personal credit health from multiple credit bureaus in one dashboard. You'll also get recommendations for credit cards and financing based on your data.

Nav Prime, the paid version, offers detailed credit information from leading business credit reporting agencies: Dun & Bradstreet, Equifax and Experian, along with business credit scores based on that data. 

With Nav Prime, you’ll also get a tradeline submitted monthly to the major business credit bureaus which may help your business establish and build your credit history.

You don't want your personal credit to be invisible, either. Many small business lenders will check personal credit, especially when your business is still establishing credit.

With Nav Prime you'll get personal credit scores and detailed reports from Experian and TransUnion. (Scores provided are the TransUnion VantageScore 3.0, and Experian VantageScore 3.0.)

Reports and scores are updated monthly when you log in. Use Nav on a regular basis to understand what information companies are reporting about your business, and view both business and personal credit in one dashboard.

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