What is a thin credit file and how do you improve it?
What does it mean to have a thin credit file?

Having a thin credit file means that you have little to no credit history to report on. In other words, companies don't have much access to information about your financial history. Experian says that if you have five or fewer accounts in your credit history that are tracked by one of the three main credit bureaus — Experian, TransUnion and Equifax — you would be defined as having a thin credit score. Many credit scoring models require at least one or two accounts to generate a credit report in addition to three to six months of payment activity. Some people may have a thin enough file that a credit score can not be generated. Individuals with thin credit files may receive less favorable terms from lenders or oftentimes have their applications denied outright. Don't miss: How to understand and check your credit score for free

Why would someone have a thin credit file?

There can be several reasons that someone might have a thin credit file, and many of them aren't necessarily negative. If you are relatively young you might not have had enough time to develop a strong credit profile. Similarly, if you recently immigrated to the U.S., your home country's credit history generally won't transfer over, meaning you might be building your credit file from scratch. In addition, some people try to avoid credit and will frequently use cash or debit cards to pay for purchases, both of which don't impact your credit score. If you had credit accounts in the past but not recently, this may also contribute to a thin credit file as accounts will fall off your record in about seven to ten years depending on the type of negative information.

How to build up a thin credit file

There are several ways you can fatten up your thin credit file. An easy way to improve a thin credit file is by using a secure credit card, such as the Discover it® Secured Credit Card. The Discover it Secured Credit Card allows you to earn rewards as you improve your credit score and offers a path to upgrading to an unsecured card as early as seven months after opening your card.

Discover it® Secured Credit Card Learn More On Discover's secure site Rewards Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.

Welcome bonus Discover will match all the cash back you've earned at the end of your first year

Annual fee $0

Intro APR N/A on purchases

Regular APR 28.24% Variable

Balance transfer fee 3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

Foreign transaction fee None

Credit needed New / Rebuilding

*See rates and fees, terms apply. Read our Discover it® Secured Credit Card review.

For some, taking out a credit-builder loan might be a good path toward beefing up their credit file. The Self Credit Builder Account requires no large upfront payment and users can choose from four different pricing options. This credit-builder loan works by holding your loan in a Certificate of Deposit (CD) that is FDIC-insured, you make monthly payments that are reported to all three major credit bureaus and at the end of your term, once you've paid off your loan, your CD matures and unlocks minus fees and interest.

Self Credit Builder Account Learn More Annual Percentage Rate (APR) 15.72% to 15.97

Loan purpose Building credit history

Loan amounts Payment options ranging from 25$ to 150$ a month.

Terms 24 months

Credit needed Poor or no credit

Origination fee One-time, non-refundable administrative fee of $9

Early payoff penalty Early withdrawal fee of less than $1, depending on the size of your Credit Builder Account, if your account closes early without being paid off in full

Late fee Late fee of up to 5% of the monthly payment amount if you don't make the full monthly payment on your Credit Builder Account within 15 days of the payment due date Terms apply.

Another way to build your credit file is by paying bills on time utilizing *Experian Boost®. This is a free feature that allows users to link certain bills, like cell phone plans, utilities and streaming subscriptions, to Experian and get credit for positive, on-time payments. It's important to note not all types of payments are eligible and it will only influence your Experian credit report and score, not your credit scores with Equifax or TransUnion.

Experian Boost™ Learn More On Experian's secure site Cost Free

Average credit score increase 13 points, though results vary

Credit report affected Experian®

Credit scoring model used FICO® Score Results will vary. See website for details. How to sign up for Experian Boost: Connect the bank account(s) you use to pay your bills Choose and verify the positive payment data you want added to your Experian credit file Receive an updated FICO® Score Learn more about eligible payments and how Experian Boost works.

Bottom line

Having a thin credit file is not the same as having bad credit. However, it's still important to build up your credit history to gain access to more financial opportunities. Building up a large credit file can help financial institutions learn more about your financial habits and could aid you in getting better rates and opportunities down the line.

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For rates and fees of the Discover it® Secured Credit Card, click here. *Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.