What does it mean if I have a ‘thin credit file’?

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In a Nutshell

A thin credit file means you don’t have enough information — or enough recent information — in your credit history for a credit bureau to determine your credit score. A thin file can make it difficult to get approved for a loan or credit card. The good news is you can build up a thin credit file over time. Credit builder cards could be a starting point. And if an error on your credit report is the reason for your thin file, you can dispute it.
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Have you discovered that you don’t have a credit score? You may have a thin credit file, meaning you don’t have enough credit history for the two major credit bureaus — Equifax and TransUnion — to get a clear picture of your credit and generate a score. A thin credit file can make it difficult to get approved for a mortgage, auto loan or credit products — and if you are approved, you could pay a higher interest rate. Read on to learn more about how a thin credit file can negatively affect you and what you can do to begin building a credit history.

What does it mean to have a thin credit file?

A thin credit file means you don’t have enough credit history for a credit bureau to calculate a credit score. We describe a thin credit file as a credit history with fewer than five accounts or accounts that have only been open for a short period of time. You may also have a thin file if you don’t have enough recent credit history. 

Without proof that you have a history of making the monthly minimum payment on time and keeping your credit utilization low, lenders could view you as risky and may not approve you for a loan or credit card. And if they are willing to take on the risk, they’ll likely charge you a higher interest rate in exchange, which could add thousands of dollars to the cost of your loan, depending on the size of your loan. If you have a thin file, you may also struggle to get approved to rent an apartment if the landlord requests a credit check.

Why do I have a thin credit file?

Here are some reasons why you may have a thin credit file.

You’ve never had credit

If you don’t have any lines of credit listed on your credit reports, like a credit card, mortgage, auto loan, student loan or any other kind of loan, a credit bureau may not be able to generate a credit score for you. This may be the case if you’re recently divorced or widowed and your spouse put all loans and credit cards in their name. You may also have a thin credit file — or no credit file at all — if you recently moved to Canada from another country and have little or no credit history established in your home country.

You’re new to credit or reestablishing credit

If you’ve recently opened your first credit card or loan, don’t expect to have a credit score right away. It takes time to build your credit history and develop a score. In the meantime, there may be very little information in your credit file. The same applies if you’ve recently started reestablishing credit after closing your credit accounts or after a period in which you used only cash or debit cards.

The credit bureaus think you’re deceased

It seems weird, but it happens: credit bureaus can mistakenly believe you’ve passed away. Deceased people don’t have a credit score, so you might be told you have a thin file if that’s what the credit bureau thinks. Unfortunately, correcting this can be a lengthy, time-consuming process.

Your credit file is split

Like a credit bureau mistakenly thinking you’re dead, a split file is an outlier. Split files rarely occur, but when they do it’s often because there’s a lot of information on your report or your personal information, like your name and address, have changed frequently. Both causes can lead to a single credit bureau having multiple credit reports and a credit score on file for you, each with different information about the financial institutions you bank with and the financial products you use. If your information is being split, it could potentially lead to a credit bureau trying to generate a score for you based on very limited information.

How can I fix a thin credit file?

Here are some ways you can begin to build credit and fix any errors on your credit reports.

Credit builder credit card

Credit builder credit cards are designed for people who want to build or rebuild credit, so your lack of credit history may not be an obstacle to approval. These cards usually have low credit limits and a high APR (Annual Percentage Rate) to start with. This helps reduce the risk to lenders if you can’t pay back the money you borrow. 

Because these cards are aimed at helping people who need to build up credit history from scratch, it’s likely you’ll have to do without some of the promotional features and rewards you find on other credit cards.

When applying for a credit builder credit card, be sure to ask whether the card issuer reports your monthly payments to the credit bureaus. Making consistent, on-time payments and keeping your credit utilization rate below 30% can help you build your credit. Also, consider annual fees and other card terms to help make sure you can afford the card.

Credit-builder loan

Another option is a credit-builder loan, a type of loan where the lender offers you funds that are deposited into an account held by the lender. You’ll then make monthly payments to pay off the loan. You’ll be able to use the funds — minus any fees and interest — after you pay the loan back. Before you take out a credit-builder loan, shop around and compare loan terms and rates from a few banks, credit unions or online lenders. This can help you identify the loan that best fits your needs.

Report and dispute credit report errors

If you think you’ve been marked as deceased, have a split file or find other errors on your credit reports, contact the credit bureaus and notify them of the mistake. You can also file a dispute.

In the case of a split file, first check that your information is actually being misreported by obtaining your credit reports from the two major credit bureaus and comparing them. If it’s clear from this comparison that one of the credit bureaus has accidentally split your file, you can then contact that credit bureau directly to have your reports merged.

What’s next?

A thin file may make you feel discouraged, but taking the steps to dispute any credit report errors and to build your credit could pay off. Improving your credit score may help increase the likelihood of being approved for a loan or credit card, and could result in better rates and terms, potentially saving you thousands of dollars.