Statistics indicate that roughly one in ten consumers is considered “credit invisible,” meaning they lack any credit history recognized by major credit bureaus like Equifax, TransUnion, and Experian. While it was once believed that having no debt was advantageous, this perspective has changed.
Credit Invisible vs. Credit Unscoreable
It’s important to differentiate between being credit invisible and being unscoreable. Although neither condition results in a credit score—especially in the mortgage industry—they are not the same. Being credit invisible means you have never had any form of credit, such as a credit card, mortgage, or auto loan. In contrast, being unscoreable indicates that you have had credit in the past but currently do not. To generate credit scores, you must have at least one open account that has been active for six to eight months and has maintained a balance during that time.
Having No Credit History
Lacking recent credit history may allow you to generate a “personal score” or “educational score,” but it won’t suffice for a mortgage score. Personal scores use different algorithms, primarily FICO 08 and 09, as well as Vantage 03. These are the scores you see when checking your credit through services like Credit Karma, which only uses Vantage Scores. Approximately 28 million consumers are credit invisible, with an additional 21 million classified as unscoreable.
While some view having no credit as having no debt, this can present challenges. Without credit or scores, it becomes difficult to purchase a car, secure a mortgage, or rent an apartment. Even booking a hotel room or renting a car can be problematic without a credit card.
Start Building Credit
So, how can you start building your credit visibility and score? One effective way is to open a credit card. If you have no credit history, you may need to begin with a “secured” card. There are several good options available, and a useful resource for finding them is bankrate.com.
To generate a score more quickly, consider becoming an authorized user on a family member’s existing credit card, provided it has a long history, no late payments, and a low balance. This approach can yield scores more rapidly, while opening your own card may take 6-8 months.
What About Scoring Models?
Both Experian and TransUnion offer programs to help consumers build credit and generate scores, but it’s important to note that these won’t impact mortgage scoring models. Experian’s program, Experian Boost, affects only FICO 08 and 09 and solely with Experian. TransUnion’s program, eCredable Lift, impacts only the Vantage 03 score and is exclusive to TransUnion. The good news is that these factors will be included in mortgage scores once FICO 10T and Vantage 04 are adopted by government-sponsored enterprises (GSEs), likely not until around Q4 2025. One of the key benefits of the new scoring models is their inclusion of alternative credit data, such as utility and rent payments, which could benefit those who have been credit invisible or unscoreable.
While there are various reasons someone might be credit invisible or unscoreable, the process to start building your credit and generating the necessary scores is relatively straightforward.