Credit Invisible: What Is It and What Can You Do About It?

The term credit invisible refers to individuals with a limited or nonexistent credit history. While it’s normal for kids, most adults benefit from a robust, visible credit history. That’s because adults need access to strong credit when it’s time to buy a house or car, take out a personal loan, or even land the job they want.

There are several reasons you may be considered credit invisible, including:

• No credit of your own: If you’ve never had a credit card, loan, or other form of credit in your name, you may have a very thin or nonexistent credit history.

• Limited use of credit: Even if you do have credit accounts, failure to use them over a long period of time can lead to an inactive status.

• Immigrant status: If you’re a newcomer who has yet to establish credit in the U.S., you may be considered credit invisible until you’ve had time to establish yourself financially.

The great thing about credit invisibility is how easy it is to change. Making any of these simple moves can help you create the credit reputation you want.

Tag Along as an Authorized User

If you have a close family member or trusted friend with excellent credit habits, consider asking if you can become an authorized user on their credit card. That doesn’t mean you ever have to use the credit card. In fact, that’s the beauty of becoming an authorized user. 

Each time the cardholder makes a payment, it gets reported to credit bureaus in both of your names. You receive credit for on-time payments without the risk of incurring debt.

Note that if the account holder pays late or carries a high balance, those actions could hurt your credit standing. That’s why it’s important to tag along with someone who avoids credit card debt and always pays their bill on time.

Open a Credit Card

You can consider applying for a credit card of your own. If you’re a college student, there are plenty of student credit cards to choose from. One nice thing about student credit cards is that they’re geared toward people who are light on credit history. However, if you’re not a student, you still have options.

Major department stores sometimes offer credit cards that are easier to qualify for than traditional cards. You’re usually only able to use these cards at that particular store—they are called closed-loop cards. Make it a practice to use your card for a small, necessary purchase once a month, and pay it off in full each month before interest is charged. It’s a win/win. You build credit while avoiding debt.

There are also secured credit cards (also called credit builder cards). Here’s how a secured credit card works:

• You send a deposit.

• The credit limit on the card is typically equal to the amount of your deposit. For example, if you deposit $500, the card will have a spending limit of $500.

• You use the credit card in the same manner you would use any other card.

• You make regular monthly payments.

• Each time you make a payment, it’s reported to the credit bureaus, helping to build a credit history.

Secured credit cards often act as a stepping stone, helping you transition to a traditional credit card. After six to 12 months of responsible use, you can apply for a traditional credit card. If you’re approved, you can pay off your secured card account and request the return of your deposit. Some issuers will graduate you automatically. 

A few factors to keep in mind:

• Some secured cards charge an annual fee, while others don’t. Shop around for a card with no annual fee. While you’re at it, look for a card with no monthly maintenance fee.

• Some cards may charge a one-time fee to open an account.

• The interest rate on a secured card will probably be on the high side. However, like any other card, if you pay the balance off in full each month, you can avoid costly interest charges.

Get a Boost

The credit bureau Experian offers a feature that can help you build a FICO Score (and your credit report) by giving you credit for eligible on-time utility, phone, and certain other payments, such as rent, insurance payments, and even streaming service bills.

It’s called Experian Boost, and it’s free to sign up for it.  The only thing you have to do to make it work for you is pay your bills on time. 

Maintain a Low Credit Utilization Rate

Credit utilization refers to how much of your available credit you’re using on your credit cards. Creditors like the idea of you having access to credit, but the way you use it matters for your credit score. 

Seems silly to be offered a spending limit higher than creditors want you to utilize, doesn’t it? Still, it gives creditors a chance to learn how you manage the money that’s available to you.

Once you've established credit and can secure a personal loan, credit card, or other financial opportunity you desire, you may even appreciate the reminder to keep utilization low, so you don’t find yourself in unnecessary debt.