Creating Creditworthiness

Interactive Video

[A man sitting at a desk beside a balcony door, typing on his computer.]

Narrator: Harry Potter’s cloak of invisibility may sound like fun, but it’s no fun being invisible—or at least “credit invisible.” One in 10 adults have no history with a credit-reporting agency. Of these 26 million people who don’t have any established credit, 40 percent are under age 25.

[A young woman standing and smiling. A cloak of invisibility covers the woman, and a thumbs-down emoji appears.]

One in 10 adults have no history with a credit-reporting agency. Of these 26 million people who don’t have any established credit, 40 percent are under age 25.

And an additional 19 million people are considered “credit unscorable.”  This means they have an insufficient credit history or outdated credit records with no recent credit history.

[A credit report with a “no” symbol over it and a credit card with an “outdated” stamp.]

That adds up to 45 million people in the United States who may be denied housing, employment, or car insurance because they do not have adequate credit records to qualify.

[House keys with a “no” symbol over them, the word “job” with a “no” symbol over it, and a car with a “no” symbol over it float across the screen.]

Is your credit visible and scorable? 

[A man looking at his tablet with a thought bubble containing a question mark over his head.]

When you’re first starting out, you usually have no job history and no credit history. The main credit reporting agencies—Equifax, Experian, and TransUnion—know very little about you. 

[A group of high school-aged students walking down the street smiling. Question marks appear.]

As you begin to work. spend, and possibly borrow money, these companies collect data about you to create a credit score that can be used by lenders, businesses, landlords, insurance companies, and employers to help make decisions about working with you financially.

[A briefcase, cash, coin, and a hand holding a bag of money show lines moving toward a credit agency indicating the agency is receiving information about you. A credit score meter begins to fluctuate from good, to fair, then to very good.]

If there’s very little data about you, these companies can’t assign you a credit score.  While you might think that’s good, because it doesn’t sound negative, it actually can be.

[A person holding a piece of paper with a question mark over their face while standing next to their credit report that has multiple lines of question marks. The credit score meter also has a question mark indicating an unknown score.]

Potential lenders, landlords, employers, or other entities checking your credit score may be cautious if they don’t find a credit score. 

[A man working on his computer filling out a loan application. A caution symbol appears indicating risk.]

They may likely decide not to take a risk on whether you will repay funds or if you are financially responsible. 

[A loan application with a stamp that says “rejected.” The man says, “too risky…”.]

So how do you start to build credit, or add to your credit story?

[A young woman looking confused as she asks herself “How do I start to build credit?”]

[Onscreen Text]: Explore ways to build credit. Select each card.

Card 1: credit Card

One quick and easy way is with a credit card. Obtaining and staying current on a credit card shows financial responsibility.

Card 2: secured credit card

Other options include a secured credit card or a credit-builder loan. Both are common choices for those seeking to build a credit history from scratch. 

Card 3: authorized user

Even being an authorized user on a family member’s existing card will build your credit.

Card 4: utilities

Also, if you’re paying utility bills, streaming services, insurance, or rent, some credit agencies will let you add those to your credit score. These are items that aren’t typically included in your credit report.

Card 5: cosigner

Another way to go is to add a cosigner to a loan or credit card application. That person will accept responsibility for your payments if you’re not able to pay.

Remember: Credit cards or loans left unpaid, or maxed out, can harm your credit history and lower your score. If you have a cosigner or share credit with someone else, that person’s credit will be just as affected as yours.

[A pile of past due bills shows and a credit score meter goes from “good” to “poor.” A man looking regretful with his hand over his head and the cosigner appears angry with her hands on her hips.]