What is a thin file?

A thin file is another way of stating that a file has a short, or non-existent, credit history i.e. they have never borrowed, a case true for most young people. This can affect customers’ credit applications as they have no way to prove their credit trustworthiness to lenders, often resulting in rejected credit applications. In order to generate a credit score, the number by which most lenders judge your credit trustworthiness, you must have a credit history.

In order to judge whether they take the risk of lending money to you, a lender must know whether you have had a good history for repayments, requirements which a thin file cannot satisfy. You must be able to prove to lenders that you are capable of borrowing and managing repayments responsibly, so for once, having not borrowed any money and having no credit history is a bad thing. If you can borrow and repay on time and in full month after month then a lender knows you are likely to keep doing so and will be more willing to lend to you in the future.

In order to start building a decent credit report from a thin file, you have to take advantage of the credit products tailored to you and your lack of credit history without amassing an unmanageable debt. Bad Credit Credit Cards are one of the best ways to build credit. These cards are specifically designed to allow people who have little or no credit to borrow – in small amounts – and prove their ability to meet repayments. If you spend a small amount on a credit card – ideally 50% or lower than the credit limit – and repay each month, either in full or a the very least the minimum amount, you will start to build a good credit file. In order to help you keep on top of this, we recommend setting up Direct Debits for each repayment, meaning that all you have to worry about is whether you have enough money in your external account to pay off the direct debit each month. However, through the use of direct debits, you will never miss a repayment as they are taken automatically.

As credit scores fluctuate with your use of credit, either sensible or not so, you always have a chance to improve your score, and the easiest way to make sure you are going in the right direction is to keep checking your report and score with SearchMyCredit; it’s completely free and does not affect your score, no matter how many times you check.