Insufficient credit history means that you don’t have enough experience as a borrower for a lender to approve you for a credit card or loan. Without a sufficient amount of information in your credit report, a financial institution cannot predict how you will handle borrowed money as accurately. So it’s common to see the term “insufficient credit history” on a letter of denial from a lender. But it may come up other times, too, like when you’re apartment hunting. Renters with insufficient credit history are more likely to be asked for money upfront.
Having insufficient credit history doesn’t mean you’ve done anything bad. It just means you’re inexperienced. And that won’t keep you from borrowing, building credit, finding an apartment, etc. You just have to choose wisely. For example, there’s an entire class of credit cards for people with limited or no credit. And using such a card responsibly will help you build a strong track record as a borrower, making insufficient credit concerns a thing of the past.
Here’s what insufficient credit history means and how to fix it:
- Insufficient credit history is a term that lenders use to tell you that there is not enough information in your credit report to approve you for a loan or credit card.
- If you have insufficient credit history, it might mean that you have less than 3 years of recent credit experience, a track record of credit mistakes, or just not enough experience with different types of borrowing.
- Insufficient credit history is something you can start to change in as little as a month. One way to start is to become an authorized user on someone else’s credit card. Or, you can apply for one of the many credit cards for people with limited or bad credit.
- There are plenty of credit cards for people with insufficient credit history, including secured cards (easiest to get, thanks to a required security deposit) and unsecured credit cards designed for applicants with limited or no credit history. As long as you have some form of income, you should be able to get a card.
- You can ask your local bank or credit union if they offer credit-builder loans. This involves the financial institution depositing a small sum of money in your savings account, which you then repay over an agreed-upon number of months. The lender reports your payment history to the credit bureaus each month. And you get access to the savings account afterward.
You don’t need to feel too stressed about having an insufficient credit history. But you should also strive to start building credit as soon as possible. Getting a credit card, making small purchases each month, and always paying your bill (in full) by the due date will set you firmly on the credit-building path.
You can check your latest credit score for free, and track its progress over time, on WalletHub.