CFPB Releases Study on Low-Income and Credit Visibility

06/16/17 – The Consumer Financial Protection Bureau (CFPB) has released a study on the transition to credit visibility that found that the way consumers establish credit history can differ greatly based on economic background.

Previously, in 2015, the CFPB estimated that 11 percent of adults in the United States, or about 26 million people, are credit invisible with no credit history at one of the three nationwide credit reporting companies.

Today’s study examined how consumers first establish credit history by reviewing de-identified credit records of more than one million consumers who became credit visible. It examined when consumers transition out of credit invisibility and the means by which they do so. The study found that almost 80 percent of transitions occur before age 25 and that credit cards are the most common way consumers establish credit. The study also found that the way consumers establish credit history—taking out a credit card, relying on a co-borrower, or having negative records—can differ greatly based on economic background.

Specifically, consumers in lower-income areas are more likely than those in higher-income areas to become credit visible due to negative records such as a debt in collection. Consumers in higher-income areas are more likely than those in lower-income areas to establish credit history by using a credit card or relying on someone else. The study also found that the percentage of consumers transitioning to credit visibility due to student loans more than doubled in the last 10 years.

CFPB Press Release, Report.