The Consumer Financial Protection Bureau has found that 26 million Americans are “credit invisible,” meaning they do not have any credit history with a nationwide consumer reporting agency.

The report also found that Black consumers, Hispanic consumers, and consumers in low-income neighborhoods are more likely to have no credit history with a nationwide consumer reporting agency or not enough current credit history to produce a credit score. 

“Today’s report sheds light on the millions of Americans who are credit invisible,” said CFPB Director Richard Cordray in a release. “A limited credit history can create real barriers for consumers looking to access the credit that is often so essential to meaningful opportunity—to get an education, start a business, or buy a house. Further, some of the most economically vulnerable consumers are more likely to be credit invisible.”

The three nationwide credit bureaus generate credit reports that track a consumer’s credit history. Credit reports and the three-digit credit scores that are based on those reports play an increasingly important role in the lives of American consumers.

Most decisions to grant credit and set interest rates for loans are made based on information contained in credit reports. As a result, those consumers who have a limited or nonexistent credit history face greater hurdles in getting credit.

 In broad terms, consumers with limited credit histories can be placed into two groups. The first group is consumers without a credit report, or the “credit invisibles.”

The second group, the “unscored,” includes consumers who do not have enough credit history to generate a credit score or who have credit reports that contain “stale” or not recently reported information. The exact definition of what constitutes insufficient or stale information differs across credit scoring models, as each model uses its own proprietary definition. 

 The CFPB’s findings include:

  • 19 million consumers have unscored credit records: About 8% of the adult population has credit records that are considered unscorable based on a widely-used credit scoring model. Those records are almost evenly split between the 9.9 million that have an insufficient credit history and the 9.6 million that lack a recent credit history.
     
  • Consumers in low-income neighborhoods are more likely to be credit invisible or to have an unscored record: Of the consumers who live in low-income neighborhoods, almost 30% are credit invisible and an additional 15% have records that are unscored. These percentages are notably lower in higher-income neighborhoods. For example, in upper-income neighborhoods, only 4% of the population is credit invisible and another 5% are unscorable under the widely-used model.

     
  • Black and Hispanic consumers are more likely to have limited credit records: Black and Hispanic consumers are considerably more likely to be credit invisible or have unscored credit records than White or Asian consumers. About 15% of Black and Hispanic consumers are credit invisibles compared to 9% of White consumers. An additional 13% of Black consumers and 12% of Hispanic consumers have unscorable records under the widely-used model compared to  % of White consumers. CFPB analysis suggests that these differences across racial and ethnic groups materialize early in the adult lives of these consumers and persist thereafter.