As you know, having a poor credit history can be a
big problem if you are trying to obtain credit for a major purchase such as a
car or a home. But did you know that a limited credit history (or no credit
history) is just as big a problem as a “bad” credit history? Creditors, such as
banks and other lending institutions are looking for a solid payment background
when an applicant requests a loan for any reason. They want to see that the
applicant has paid other credit debts on time and without missing payments in
the past. This is their assurance that they will be paid on time when lending
money to a new customer. Without a credit history they have no way to decide if
an applicant is a good or bad risk.
Surprisingly, the CFPB (Consumer Financial
Protection Bureau) has published a report stating that 26 million Americans are
“credit invisible.” This means that about 1 in every 10 adults do not exist in
the records of the nation’s 3 largest credit reporting agencies. In addition
about 8% of the adult population in the U.S. (19 million people) has what is
known as an “unscored” credit rating. Although they do have some previous credit history, it is not
enough to determine an appropriate credit rating for them. There simply isn’t
enough credit history to decide if they are credit worthy in the eyes of
lenders.
For those persons that are looking to buy a home of
their own, being credit invisible is a major hurdle. Many people think that as
long as they don’t have any negative entries on their credit report that obtaining
credit will be easy and do not realize that a “lack of credit” is also a
problem. This is yet another reason for home seekers to obtain a pre-approval
from their lender before actively searching for their dream home. There are
steps that one can take to remedy this situation and the lender may be able to
help. Attempting to get approval for a home mortgage without a substantial
credit history could prove to be a problem for the more than 45 million
Americans that find themselves to be in what some refer to as “credit limbo”.
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