On June 23, the Consumer Financial Protection Bureau (CFPB or Bureau) released an update to its 2015 report on Americans who did not have a credit record (credit invisibles) or who had insufficient credit history to have a credit score (“stale unscored” and “insufficient unscored”). The CFPB provided this update, driven by methodological corrections and enhanced data sources, in an effort to offer a more accurate depiction of the number of Americans with limited credit histories and highlight significant changes over the past decade.
Credit invisibility refers to the absence of a credit record for an individual, which can significantly impact their ability to access financial products and services. The original 2015 CFPB report estimated that 11% of U.S. adults were credit invisible, equating to approximately 25.9 million consumers. However, recent data corrections have halved this figure, revealing that only 5.8% of adults, or 13.5 million consumers, were credit invisible in December 2010.
Key Findings from the Updated Report
- Reduction in Credit Invisibility: By December 2020, the share of credit invisibles had decreased to 2.7%, representing about 7 million consumers. According to the CFPB’s report, this decline underscores improvements in credit accessibility and the effectiveness of initiatives aimed at integrating more individuals into the credit system.
- Increase in Scored Credit Records: The proportion of adults with scored credit records rose from 81.6% in 2010 to 87.5% in 2020. The CFPB determined that this increase reflects advancements in credit scoring methodologies and broader access to credit-building opportunities.
- Revised Estimates for Unscored Records: The share of adults with unscored credit records in December 2010 was revised from 7.4% to 12.7%, highlighting the impact of including previously excluded data, such as records with deferred student loans, collections, or closed accounts.
Data Corrections and Methodological Enhancements
The CFPB’s updated analysis utilized the Consumer Credit Information Panel (CCIP), a 2% sample of de-identified credit records from one of the three nationwide consumer reporting agencies. The CFPB stated that the CCIP provides a more comprehensive data source than the previously used Consumer Credit Panel. For example, records with only deferred student loans, collections, or closed accounts were not contained in the Consumer Credit Panel, and therefore were inadvertently excluded from the 2015 analysis. The inclusion of records with only deferred student loans, collections, or closed accounts in the updated report increases the number of consumers with a credit record.
This switch in data sources allowed for the inclusion of records that were previously overlooked, providing a more accurate estimate of credit invisibility. Additionally, the report corrected for inquiry-only records, which do not reflect a history of credit use, further refining the estimates.
Implications of the Report
The decline in credit invisibility and the increase in scored credit records have significant implications for consumers and the financial industry. More individuals now have access to credit, enabling them to participate more fully in the economy. This report underscores the evolving landscape of credit accessibility and the importance of accurate data in understanding consumer credit histories.
The CFPB intends to explore demographic variations and geographic trends in future analyses, offering a comprehensive understanding of credit access across different consumer groups. This ongoing research will provide further insight into how credit invisibility affects various populations and inform strategies to reduce barriers to credit access.