Thin Credit Files
Thin Credit Files
There is new hope for consumers with thin credit files. People without reporting accounts that are 6 months old and have some activity within that 6 months are invisible to credit reporting agencies. This is the way the credit scoring computers operate. Representatives Keith Alison, D, Minnesota and Jim Renacci, R, Ohio are introducing a bill under the Credit Access and Inclusion Act that will allow utility and telecom (cell phone) companies to report on time payments to the credit reporting agencies.
This would help cure regulatory uncertainty. Currently consumers can get dinged by negatives when these accounts go into collection without the benefits that would accrue if on time payments were reported. Consumers with thin credit files can lose but not win as the practice currently stands!
According to the Economic Policy and Research Council this could make as many as 74% of the so called “credit invisibles” visible to the credit reporting agencies. Credit invisibles is a term the Wall Street Journal uses to describe those with thin credit files. Most of these people are in the 18-25 year old range. This reporting would be permissible but not mandatory.
Overlooking these on time payments relegates many people to higher interest rates on the credit they are able to get while dooming otherwise reliable people to the tender mercies of payday lenders and pawn shops and auto title loans for financial emergencies. Consumers with thin credit files are frequently unaware that this is the reason for their lack of a decent credit score. The thin file problem is usually solved with secured credit cards that report to the Big 3 Credit Reporting Agencies regularly. If you know someone who will let you become an authorized user on a card with good age and low debt to available credit ratio this will do wonders for your credit score. Tell them you don’t even want to have an actual credit card in your possession to set their mind at ease. Make sure there are no late payments on record.
Thin Credit file Reporting Works Both Ways
Of course those that want their cell phone records and other records that don’t normally get reported to become part of their file better be expecting to pay on time. This policy is the classic “two edged sword” that can hurt the user as well as help. Think twice…act once