What Is A Thin Credit Report?

What in the world is a “thin” credit report?  Well, it’s exactly what it sounds like.  A thin credit report has very few accounts on it; therefore, it has very little credit history.

The segments of the population to which this applies are young adults, those new to the work force, students, new immigrants, widows, and divorcees.  It is more challenging to evaluate their credit risk, because of the lack of credit history.  Credit scores are built to evaluate thin reports and score them, although there is a special logic for evaluating them.

Another challenge those with thin files face is whether or not they’ll even have a credit score.  It’s not a guaranteed thing, having a score.  In order to receive a credit score, the credit report must meet the following criteria:1.    The file must have at least one account with activity in the past 6 months. This is based on the date it was reported on the credit report or the “date reported”.

2.    The file must have at least one account opened for six months. The account has to be at least 6 months old. This is the “date opened” on the credit report.

3.    The file cannot have a deceased indicator. The can occur if the account is shared with someone who has died or if the individual is dead.

One account can meet the qualifications for both items 1 and 2. The report can be scored with only one account as long as this account has been updated in the past 6 months and has been opened at least 6 months.  An example of a thin credit report that cannot be scored is one that has one account opened three months ago.

A thick report contains numerous accounts, with some opened for many years. It contains a mixture of accounts such as revolving (credit cards), installment (mortgage and auto loans), opened and closed accounts.  There is more than enough payment information, both current and historical to calculate a score and for creditors to make a credit decision.

It takes time to build a credit history and you should do so responsibly. Only apply for credit when you need it and pay your bills on time and in full.  Then, you’ll never have to worry about your credit scores again.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.

Categorised in: Credit Cards, Credit Report, Improving Credit, Money & Identity

This post was written by John Ulzheimer