Just how many people are 'credit invisible?'

One of the big issues for many consumers who do not have access to credit right now is that they feel as though they have no real way of proving themselves fit to borrow responsibly. And as far as many of the nation's financial institutions are concerned, those people are exactly right. They fall into a pool of tens of millions of people who, by traditional credit monitoring standards, are considered "unscoreable," and therefore, "invisible."

Estimates on the number of consumers nationwide who do not have a sufficient credit history to even carry a credit score can vary widely, but it's generally agreed that this number could be as high as 40 million. That number is a little more 1 in every 8 Americans, a staggering amount of people who simply do not have access to credit. That number also doesn't include the millions more whose credit histories are damaged in some way - often through no fault of their own - because financial difficulties made it hard for them to qualify for credit with many lenders. By some estimates, including those people in the mix with "credit invisible" consumers bumps the number of people with limited or no access to credit to about 1 in 4 Americans.

One group hit harder than most
This may be particularly true of younger consumers. When the recession hit, many were still in college or had only just graduated, and as such they quickly developed a kind of aversion to borrowing; perhaps they saw their parents struggling to pay their bills, or maybe they were having enough financial difficulties without the burden of paying interest on top of what they were already spending.

In either event, these issues have come together to force as many as 1 in 3 millennials into being locked out of the borrowing ecosystem. Recent data suggests that they have a significantly higher rate of both no or limited credit histories than the average consumer nationwide.

A potential shift
However, because so much attention has been paid to this huge swath of people who are effectively locked out of the credit system these days, many financial experts are changing their tunes on how best to consider credit applicants. Many now see value in so-called "alternative" credit scores, such as those from PRBC, which examine not only how a person has handled their accounts like credit cards and loans, but also how they've been able to keep up with their monthly payments for things like rent, utilities, and phone bills.

Many consumers are aware that they have the option to utilize alternative scores, but many more are not, and as such it might be wise for companies that would keep tabs on this data - like landlords, telecom companies, and utilities providers - to ask consumers if they want such information reported. If so, that data could go a long way to helping financially disadvantaged consumers get into the borrowing system and build up a responsible payment history in short order.

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