Although it’s an imperfect system, building a good credit history is essential. Not everyone is able to secure credit at a competitive rate — 106 million Americans are currently in this position as of 2024, in part due to invisible credit, according to Experian. This can make achieving financial goals and wealth creation challenging at best.
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GOBankingRates asked two banking experts to provide insight on how to break credit invisibility. Teri Williams, president and COO of OneUnited Bank, and Kristy Kim, CEO and founder of TomoCredit, provided valuable insight on overcoming credit invisibility.
Also, learn how to boost your credit score fast.
What Does Being Credit Invisible Mean?
Credit invisibility is what it sounds like: You’re unseen to the credit system. When you try to get a mortgage or apply for a car loan or credit card, there’s little information on you. This makes it difficult to access credit.
“Without a credit score, it’s hard to qualify for even basic life essentials, like renting an apartment, getting a car, securing a loan or even setting up your utilities without a huge deposit,” said Kim.
Learn More: Do Your Student Loans Affect Your Credit?
How Credit Invisibility Impacts Wealth Building
Somewhat paradoxically, credit ties to wealth creation. A credit score directly impacts interest rates on mortgages and other loan products. It can also determine rates on services or even if you receive a job.
“Credit is used by landlords, insurance companies, employers, etc. As an example, someone who is credit invisible may not be able to lease an apartment without a guarantor,” said Williams.
How To Build Credit With No Credit History
Building credit from scratch is possible, but it takes time. These are some strategies to follow to become credit visible.
Open a Secured Credit Card
Traditional credit cards aren’t secured by a deposit, making it difficult to receive one if you have minimal credit. A secured credit card is a good alternative for those without any credit history.
“Secured credit cards do not require a credit history or credit score and report to the three major credit bureaus, but require a security deposit,” Williams explained. “They provide an ‘on-ramp’ to credit for people who are credit invisible.”
Get Credit for Paying Bills on Time
Not all monthly payments are reported to credit agencies. Even if you pay all your bills on time, it does little to help a credit file. Thankfully, there are some options to get noticed for your efforts.
“Services like Experian Boost can help by reporting on-time payments for utilities and streaming services to credit bureaus,” said Kim.
Even small steps like this will help.
Become an Authorized User
A responsible loved one can be a great option to help you build credit. Most credit cards allow customers to add authorized users, which can be helpful to underserved individuals.
“Another way to build credit from scratch is to become an authorized user on a family member’s or friend’s credit card with a good history, allowing their positive credit habits to reflect on your report,” said Kim.
Just ask someone who responsibly uses credit to prevent this strategy from backfiring.
Apply for a Store Card
Store credit cards are notorious for having higher interest rates. However, some stores make it easier to qualify for credit. If you have a retailer or gas station you frequent, this may be a good choice.
“Some retail companies provide store credit to people who are credit invisible. You just have to be careful not to overspend using a store credit card,” said Williams.
If you opt for a store card, pay off the balance in full every month to avoid those interest charges.
Turning the tide to become credit visible is possible. Increasing your credit score gives you more access to better rates, credit cards and other financial products, making wealth creation achievable.
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This article originally appeared on GOBankingRates.com: I’m a Banking Expert: 4 Ways To Break Credit Invisibility and Build Wealth
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