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Credit Invisibles


The Consumer Financial Protection Bureau's Office of Research recently released a research report regarding credit invisibles--adults that have no credit history that can be scored by any of the three major credit reporting agencies. The report also discusses people who do have a credit history, but cannot be scored due to insufficient or stale credit histories.

The study found that 26 million Americans (11% of adults) are credit invisible. Another 19.4 million Americans (8.3% of adults) have credit records that cannot be scored. Somewhat unsurprisingly, the study found a strong relationship between income and having a credit record. 30% of consumers in low-income neighborhoods are credit invisible. Antoher 16% have unscorable credit records.

There is also a racial divide. 15% of Blacks and Hispanics are credit invisible, while only 9% of Whites and Asians are credit invisible. A similar disparity exists for people with unscored credit records.

One problem that this presents is how people who are credit invisible or who are unscored obtain goods and services. Most payday and auto title loans don't require a credit check. As a result, those who are credit invisible or unscored are funneled into those types of loans. Similarly, auto loans can be obtained, but from companies that track vehicles via GPS or use ignition cutoff devices. The loans tend to be geared towards large interest payments to the auto dealership. If the borrower defaults, the car is quickly repossessed and resold.

The final conclusion drawn from the study was that understanding the demographic makeup of credit invisibles and the unscored helps inform the process of finding a solution to the problem.