The Consumer Financial Protection Bureau (CFPB) has announced an updated report on Americans who were credit invisibles or had an insufficient credit history to have a credit score.
“Technical Correction and Update to the CFPB’s Credit Invisibles Estimate” found that subsequent analysis with updated data and a methodological correction reveals that the Bureau’s original estimate of credit invisibles should be roughly cut in half, almost commensurate with an increase in credit records that were unscored. The CFPB’s new data also shows that the share of consumers with a “scored” credit record increased between 2010 and 2020.
Consumers with limited credit histories reflected in credit records maintained by nationwide credit reporting agencies continue to face significant challenges in accessing most credit markets. Credit reporting agency records are often used by lenders when making credit decisions. Lenders often use credit scores, such as one of the FICO or VantageScore scores, that are derived entirely from credit reporting agency records when deciding whether to approve a loan application or in setting a loan’s interest rate. If a consumer does not have a credit record with one of the agencies, or if the record contains insufficient information to assess creditworthiness, lenders are much less likely to extend credit.
Consumers with limited credit histories can be divided into two groups. The first group is comprised of consumers without credit agency records, known as “credit invisibles.” The second group includes consumers who, while they have credit agency records, have records that are considered “unscorable,” meaning they contain insufficient credit histories to generate a credit score. A credit record may be considered unscorable if it contains insufficient information to generate a score, meaning the record either has too few accounts or has accounts that are too new to contain sufficient payment history to calculate a reliable credit score; or it has become “stale” in that it contains no recently reported activity.
Key findings of the CFPB’s report include:
- After data corrections, an estimated 5.8% of adults (13.5 million consumers) were credit invisible in December 2010 compared with the earlier estimate of 11% (25.9 million consumers). Correcting the data also increased the estimated share of adults with an unscored credit record in December 2010 from 7.4% to 12.7% (17.2 million consumers to 29.7 million consumers).
- The estimated share of credit invisibles in December 2020 was 2.7% (seven million consumers).
- The estimated share of adults with a scored credit record increased by almost six percentage points, from 81.6% to 87.5% percent (191.3 million consumers to 225.3 million consumers) between 2010 and 2020.
The CFPB provided the update, precipitated by methodological corrections and enhanced data sources, to provide a more accurate depiction of the number of Americans with limited credit histories and highlight trends in credit over the past decade.
For their update, the Bureau analyzed the Consumer Credit Information Panel (CCIP), a 2% sample of de-identified credit records from one of the three nationwide consumer reporting agencies.
Click here to view the CFPB’s full report, “Technical Correction and Update to the CFPB’s Credit Invisibles Estimate.”
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