CFPB Releases New Report on Credit Invisibility

The Consumer Financial Protection Bureau (CFPB) released a report on Monday that explores the impact that geography has on credit invisibility. The report, “The Geography of Credit Invisibility,” builds on CFPB’s previous two works on the subject.

Credit invisibility is a substantial problem in America today. A credit score can be an important factor in determining whether or not a person secures a conventional loan. Although most Americans have credit scores, about 20% of American adults are either credit invisible (no data available to determine credit score) or unscorable (not enough data available to determine credit score).

In their latest report, the CFPB challenges the notion that people are credit invisible because of the prevalence of “credit deserts,” where people lack access to traditional financial institutions. After analyzing Census data, the report finds that “there appears to be little relationship between distance to the nearest [bank] branch and the incidence of credit invisibility.”

This finding is consistent with the results from the Federal Deposit Insurance Corporation’s (FDIC’s) 2015 National Survey of Unbanked and Underbanked Households. This survey asked unbanked respondents (those who do not have a savings or checking account) why they did not have an account. Only 9% of respondents stated inconvenient locations. A larger percentage of people said they were unbanked because they did not have enough money to keep in an account or that banks do not offer the products or services they need.

Instead of “credit deserts,” the CFPB suggests that the lack of high-speed internet may be the reason behind credit invisibility. “The incidence of credit invisibility is consistently higher in tracts where fewer households have high-speed internet,” a pattern that holds even when controlling for income levels.