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Published: Aug 23, 2023 5 min read
Collage of credit score meter, receipts, calculator, and hand holding credit card.
Olive Burd / Money; Getty Images

It’s becoming increasingly difficult to navigate life without well-established credit. Our credit histories are factored into all kinds of decisions — from getting approved for a loan, of course, to renting a place to live and even finding affordable car insurance.

Having a bad credit score can prove very costly over time. It could mean you can't get an apartment rental or are rejected for a mortgage — or perhaps you're accepted but the interest rate is very high.

According to the Consumer Financial Protection Bureau, a federal agency tasked with safeguarding consumer finances, about 45 million Americans are “credit invisible,” meaning they either don’t have a credit history at all — or their credit report is too thin to generate a credit score. These people are typically low-income earners or people of color.

Economist Ying Lei Toh, a researcher with the Federal Reserve Bank of Kansas City, says these people have trouble getting credit cards and loans because lenders don’t know much about their creditworthiness. Toh’s research shows this situation is a financially debilitating catch-22 for millions of Americans: To obtain credit, you often must first show that you have a decent credit history.