For Americans to be able to afford major purchases like homes and vehicles, they need to have a strong credit score. Customers who don’t have a good credit score pay higher interest rates, which adds up to significant costs over the course of the loan. For example, if you have poor credit, you may have to pay an additional $400 in interest over the course of three months on a $550 emergency loan.
Thin credit files or credit invisibility are the main causes of subpar credit ratings for 71 million Americans. Of them, 16 million are credit invisible, while 61 million have thin credit files with fewer than four credit accounts. A disproportionate number of young people, recent divorcees, and immigrants are affected because they haven’t had the chance to build credit history. Thankfully,, there is a trend toward more fair credit assessment techniques, with businesses taking into account alternative data that complies with the Fair Credit Reporting Act.
