Thin File Customers — Who are they?
A person having a thin credit file, i.e. insignificant or no credit history, is referred to as a thin file customer. Traditionally credit has been offered based on the credit history of a person. However, this has led to a large part of the population across the world not having access to credit. Credit scorers have now started using alternative criteria such as online social and professional networks, education, earning potential, mobile connections, utility connections etc. to bridge this gap and come up with a rating for thin file customers.
Some thin file customers can include the following:
Students — School and college students tend to have no previous credit history.
Young Graduates — People in their first job or looking for a job may not find it easy to get credit.
Immigrants — An immigrant to a country will not have a credit history in that country and may find it difficult getting a loan.
Older Generations — Credit was considered risky by the older generation and was avoided as much as possible. Hence a lot of the older people tend to have very thin credit files.
Housewives — In developing countries especially, housewives tend to have little credit history as most loans are taken by their fathers or husbands.
People in Small Cities &Rural Areas — People residing in smaller cities and rural areas get loans from local money lenders and friends & family in cash, which largely remains unaccounted for. Hence they are not able to build up their credit files.
Startups & SMEs — Even in the corporate sector, new companies tend to have lower credit histories and find it difficult to obtain loans from financial institutions. Additional security like a collateral is required in most cases.