Lack of internet determines credit invisibility, bureau says

An inability to access the internet rather than proximity to a bank branch is a better indicator of credit invisibility, according to a report from the Consumer Financial Protection Bureau.

An inability to access the internet rather than proximity to a bank branch is a better indicator of credit invisibility, according to a report from the Consumer Financial Protection Bureau.

The report focused on the ways geographic location affects consumers’ ability to build a credit footprint. These consumers include those who are “credit invisible,” meaning that they do not have a credit record maintained by one of the nationwide consumer reporting agencies. They also include those who have a credit record that contains either too little information or information that is deemed too old to be reliable.

Lack of internet access appears to have a stronger relationship to credit invisibility than does the presence of a bank branch. Bureau research also found that many credit products are originated through online means, causing credit invisibility to be more prevalent in areas with less internet access.

Focusing on the incidence of credit invisibility among adults 25 and older may better identify tracts where access to traditional sources of credit is more limited. More than 90 percent of consumers transition out of credit invisibility by their mid-to-late 20s, indicating that a focus on older credit-invisible consumers might yield more fruitful results.

Credit invisibility among adults 25 and older is concentrated in rural and highly urban geographies. While credit invisibility is more common in rural areas as a percentage of the population, over two-thirds of adults 25 and older who are credit invisible reside in metropolitan areas because of the higher population within those areas. Rural areas overall have higher rates of credit invisibility while in urban areas, credit invisibility is tied to income.

This set of data points is the third from the bureau which focuses on credit availability. The first, Credit Invisibles, estimated the number and demographic characteristics of consumers who were credit invisible or had an unscorable credit record. The second, Becoming Credit Visible, explored the ways in which consumers establish credit records.