Credit Tips: What’s a Thin Credit File?

If you’ve just started building credit, there’s a good chance you have what’s called a “thin” credit file.

A thin credit file can mean you are new to the credit world, but even someone who has had a mortgage for 30 years can have a thin file if they haven’t opened any other credit accounts or had any negative collection actions taken against them for unpaid bills.

You may have a thin credit file if you are young and just opened your first credit card account, new to this country and just learning how to establish credit in the American system or if you are an older person and you haven’t used credit in a very long time.

You also may have a thin credit file if you prefer not to borrow and use very few credit accounts.

Tips for Building Credit With a Thin File

To generate a credit score, the absolute minimum you need in your credit file is a credit account that has been open for six months and a credit account that has been reported to a major credit reporting agency.

The national credit reporting agencies are Experian, Equifax and TransUnion and if you have an account that is reported to one or more of these credit reporting agencies, you are on your way to establishing credit.

Choosing a credit card that is reported to all three credit reporting agencies is best for credit building, along with the credit building essentials that apply to everyone, even those with robust credit files.

• Because payment history accounts for 35% of your credit score, making on-time payments on a credit card  or loan account for a year or more will help you to establish a solid credit record.
• Don’t rush. Applying for too many credit accounts at once can hurt your credit. So wait to apply for new credit until your previous account or accounts have been established for a while.
• Keep your balances in check. Maxing out a credit card can do serious damage to your credit score, so aim to keep your balances to 35% of your limit (10% is even better).

Once you have one or two credit accounts with solid on-time payment histories, you may wish to apply for a car loan, a personal loan, a new credit card or even a mortgage to keep building a solid credit history.

Keep in mind that if you apply for a new credit account, it’s best to keep your previous credit cards open and active — even if it’s just making one purchase per month — to maintain your account age, another important credit score factor.