What is a thin credit file?

A thin credit file typically refers to a credit history with fewer than five credit accounts on a credit report maintained by one of the three national credit reporting companies: Experian, TransUnion and Equifax.

Most credit scoring models need at least one or two active credit accounts on a credit report to generate a credit score. They also typically require payment activity for three to six consecutive months. If you have a thin file, a lender may not be able to obtain a credit score when considering your application. Lenders and service providers may request a larger down payment or offer credit at a higher interest rate as a result of not being able to assess risk using a score. In some cases, the lender may choose to decline the application altogether. 

Who is most likely to have a thin credit file?

You may have a thin file if you: 

  • Are young, since you may lack a credit history 
  • Are new to the United States, since credit scores and credit histories don’t transfer from other countries 
  • Haven’t used credit in a long time
  • Have very few credit accounts or accounts that have not been active recently 
  • Generally pay with cash and choose not to use credit often 

How a thin file affects you

A thin credit file can make it more difficult to access new credit when you need it, including the ability to: 

  • Get approved for a mortgage loan, car loan, or personal loan with favorable rates and terms 
  • Obtain a credit card account 
  • Qualify for an apartment or rental home 
  • Open a cellphone or other utility account 
  • Qualify for in-store financing of purchases 

Most lenders in the U.S. rely on the information in your credit history to help them obtain or calculate a credit score and assist them in the decision-making process. If you have little to no recent history managing credit accounts, a lender may feel they are unable to accurately assess the risk of approving the credit you are requesting. 

The bottom line

Fattening up a thin credit file may help you obtain financing and other services you need. The most important factor in building a positive credit history and good credit scores is to manage your credit accounts responsibly. Do so by always paying your bills on time, keeping credit card balances low and applying for credit only when you need it.

Once lenders can see you know how to manage credit accounts, you could find yourself with options for low-interest loans, rewards credit cards and more.

For more information about understanding and building your credit, please see the following articles: