Who are America’s credit invisible consumers, and how can credit unions help?

It has never been said the journey through a given member’s financial life is guaranteed to be a walk in the park.

There’s no doubt your days may occasionally include member stories of credit mismanagement, or working with members to guide them back from the brink of long-term financial distress. After all, an Intuit study in early 2020 found that 65 percent of Americans said they didn’t know how much they spent the prior month. According to a Consumer Financial Protection Bureau (CFPB) report, 11 percent of adults, or about 26 million Americans, are credit invisible. “Credit invisible” consumers, as defined by the National Credit Union Administration (NCUA), represent those whose documented credit history is so limited they don’t have credit scores, or credit scores that are not based on a complete history of debt repayment. 

Credit invisible consumers are also more likely to be unbanked, having no official affiliation with a financial institution. Often, many younger Americans who don’t have credit scores simply haven’t gone out of their way to establish a credit history. On the other end of the spectrum, older Americans who haven’t used credit often had poor experiences with banks in the past, or have trouble maintaining a bank account. What’s worse, these older consumers often choose check cashers or other alternatives over traditional banking relationships. 

In a more detailed 2015 profile report by the CFPB, findings identified: 

• Approximately one out of 10 adults does not have a credit history with any of the top credit history with any of the top credit bureaus, Experian, Equifax, or TransUnion. 
• Consumers in lower-income neighborhoods are more likely to be credit invisible or possess an unscored record. For those residing in low-income neighborhoods, 30 percent are credit invisible and 15 percent have unscored records. Compare those figures to upper-income areas, where only four percent are credit invisible and five percent have unscored records. Lastly, lower-income earners may get hit with overdraft fees or can’t maintain the minimum balances to avoid monthly fees. 
• Research shows Black Americans and Hispanic Americans are more likely to have limited credit records over whites and Asians. About 15 percent of the former are credit invisible, compared to nine percent of whites. The CFPB’s findings suggest such differences across racial and ethnic groups emerge early in the adult lives of these consumers and persist thereafter. 
• Over 80 percent of 18-19 year-olds are credit invisible or have unscored records. That number falls below 40 percent for those aged 20-24. After age 60, consumers who are credit invisible increases.

How credit unions can help?

Here is your chance to help  individuals and families get on the right side of financial inclusion. The NCUA suggests some ways credit unions can help members establish and build their credit scores. 

• Help members set up consistent bill pay for rent, utilities, or insurance
• Credit unions can help improve the credit score of a member who is credit invisible by reporting outstanding debt payment histories to a credit bureau.
• Helping members to qualify for a loan helps build their overall credit profile
• Assisting members in opening a credit card or other revolving type debt, whether it’s through your credit union or other financial institution lender, helps build a good score because the loan(s) will build the capacity component of the score
• Implement the mobile QCash life event lending platform into your credit union’s system to offer assistance to your members when they find themselves in one of life’s unexpected emergencies; be it an impromptu and unusual payment, a bridge loan between paychecks, or a car repair. QCash does not use FICO to score, but rather looks at the relationship with the credit, giving greater access to small dollar loans. And the credit union can help those members build their credit score by reporting the QCash loan to the bureaus.  

Even the most responsible and financially stable members require a loan here or there. Offer your membership the option of tapping six clicks and 60 seconds to get the QCash life event loan they need, whenever, wherever it’s necessary. For more information on QCash, go to www.qcashfinancial.com.